What is Value Investing? A Beginner’s Guide to Building Wealth

If you have ever gone to a market and found a good product selling at a cheaper price than usual, you know how exciting that feels. That idea is what value investing is all about, but instead of buying vegetables or clothes, you are buying shares of companies.

By learning this approach, you can learn to earn steadily over time by making smart investment choices.

So, What is Value Investing?

Value investing is when you buy shares of a company that you believe are worth more than their current price. Think of it like buying a ₹100 note for ₹70. You know the value is more, but the market is selling it for less.

The famous investor Warren Buffett, who built his fortune using value investing, says, “Price is what you pay. Value is what you get.”

The key is patience. Value investing is not about jumping on “hot or hyped” stocks or chasing short-term profits. It’s about long-term thinking and making sure you buy good companies at the right price. Learning this approach helps beginners learn to earn consistently rather than gambling on trends.

For example:
During the COVID-19 crash in March 2020, Maruti Suzuki shares fell from ₹7,000 to below ₹4,200 even though it is a famous car company in India. People who bought then and held on are seeing their shares worth ₹14,000 or more in 2025.

Why Does This Happen?

Sometimes the stock market gets emotional. Bad news about the economy, a temporary drop in profits or even rumours can push a company’s share price down, even if the company is strong. Value investors take advantage of these situations.

For example, during the 2008 financial crisis, many good companies’ stock prices fell by more than 50%, even though their businesses were solid. Those who bought at that time and waited saw their investments grow a lot in the years that followed.

According to a Morningstar study, from 1926 to 2022, value stocks in the US returned an average of 11.2% per year, compared to 9.8% for growth stocks (Morningstar, 2023).

Learning these patterns is a key way to learn to earn better as an investor.

Why Do Stocks Become Undervalued?

In the Indian context, share prices fall below real value due to:

1. Market Overreactions – e.g., Avenue Supermarts (DMart) dropped 25% in 2020 despite rising sales, due to COVID fear (BSE Data).
2. Economic Downturns – Cyclical sectors like steel/cement (e.g., Tata Steel) often fall hard in slowdowns.
3. Industry Worries – e.g., Pharma stocks like Sun Pharma faced undervaluation during US-FDA issues (2015–2017).
4. Short-term Setbacks – Infosys in 2017 fell ~15% after CEO Vishal Sikka resigned, though long-term growth remained intact.

Value investors take advantage of these times and learn to earn by buying quality stocks at discounted prices.

How Does Value Investing Work?

Value investing is simple to understand but requires discipline. Here’s how it works:

1. Find quality companies → steady profits, low debt, strong brands.
   • Example: HDFC Bank, known for consistent loan book quality.
2. Check valuation → Compare market price vs fair value.
   • Projected cash flows or valuation multiples like P/E, P/B, ROE help.
   • Ex: When Coal India trades at 5x earnings but pays 7–8% dividend yield, it’s worth a closer look.
3. Buy & hold patiently → Let business & compounding do the work.

In India, stocks like Asian Paints and Nestle India rewarded patient shareholders with 20x returns over 20–25 years (NSE India Data) By studying such examples, beginners can learn to earn by seeing how patience and research create real wealth.

Value Investing Strategies

1. Contrarian Investing: Buy when others are fearful.

Example: In 2020, Tata Motors’ share price was around ₹70. Today in 2025, it has gone up to over ₹700.

2. Screening Cheap Stocks: Look at low P/E, low P/B, high dividend yield.

Example: Back in 2020, ITC’s share price was around ₹160–180. By 2025, it has climbed to over ₹400, even after the demerger of its hotels business, while also giving regular dividends along the way..
(Trendlyne – ITC)

3. Rupee-Cost Averaging (RCA): Invest a fixed sum regularly in stocks or Nifty 50.

Example: Monthly SIPs in Nifty 50 ETFs or index funds.

Applying these strategies consistently is a practical way to learn to earn instead of relying on luck.

Value Investing Case Study: Successful Stock Picks

Company	Bought in…	Old Price	Today’s Price (2025)	Why Was it Undervalued?	Simple Lesson
Infosys	1993	₹95	~₹1,700*1024 (Bonus and Stock Split) = 17.4 Lacs (i.e. 36% yearly return + Dividend)	People ignored IT industry then	Wait for growth
HDFC Bank	1995	₹10	~₹1,965*20 (Bonus and Stock Split) = 39,300 (i.e. 32% yearly return + Dividend)	People doubted private banks	Good companies win long-term
Tata Consumer	2008	₹51	~₹1,084 (i.e. 20% yearly return + Dividend)	Worried about a merger	Strong brands recover
ITC	2020	₹180	~₹400 + 1/10th Share of ITC Hotel = 425 (i.e. 19% yearly return + Dividend)	People thought profits would shrink	Steady old companies bounce back

Source: (Prices based on BSE/NSE & Trendlyne data) Trendlyne -Tata consumer products Wikipedia – Infosys HDFC 

This table shows If you’d invested ₹1 lakh in such value stocks in 1995 in the stock of HDFC Bank and averaged 32% annual returns, by 2025 that investment would likely have grown to about ₹39 crores—even with no further additions. Insights 

Tips for Beginners

• Start small with familiar brands (Asian Paints, HDFC Bank, Marico, ITC).
• Avoid making investment mistakes — for example, penny stocks trending on WhatsApp groups may look exciting but often end up burning investors’ money. (Check out some more common mistakes here).
• Regularly read annual reports (available on company websites & NSE).
• Be patient — wealth grows slowly, like a tree.

As Benjamin Graham, the father of value investing, famously said: 

“The stock market is a voting machine in the short run, but a weighing machine in the long run.”

Conclusion:-

Value investing is like planting a mango tree. You do not get fruit the next day, but in a few years, you have plenty to enjoy. It has built fortunes for investors like Warren Buffett, and it can help everyday people grow their wealth too if they learn the right skills.

By applying value investing strategies, analysing undervalued stocks and learning from case studies, anyone can learn to earn steadily.

If you want to go beyond the basics, understand financial statements, calculate intrinsic value and invest with confidence, check out The Wall Street School’s Value Investing Course, where experts explain everything step by step in simple language, making it beginner friendly.

FAQs

1. Why do people follow value investing?

People follow value investing because it focuses on facts and company performance instead of market noise or hype. It’s a safe and smart way to build wealth slowly and steadily.

2. How do I know if a stock is undervalued?

The best way to do so is using financial ratios such as Price-to-Earnings (P/E), Price-to-Book (P/B) or comparing the stock price with its intrinsic value.

3. What is intrinsic value?

Intrinsic value is what a company is truly worth based on its assets, profits, and future growth potential. If the market price is lower than this value, the stock may be a good deal.

5. How long should I hold value stocks?

Value investing is a long-term strategy. You may need to hold the stock for years until the market sees its true value and the price goes up.

6. Is value investing good for beginners?

Yes, it can be good for beginners if they are willing to learn how to read basic financial statements and avoid emotional decisions. It’s a thoughtful and disciplined approach

7. Can I do value investing with small amounts of money?

Yes, you can start small. Many value investors begin with a small amount and grow their portfolio over time. The key is to pick good companies at the right price, not the size of your investment.