The stock market has hit record highs lately, and investors who still
feel the lingering effects of the market's meltdown four years ago are
finally starting to feel more comfortable with the idea of getting back
into a more normal investing routine. But if you're thinking about
getting back into the market now, you face a tough task: how to buy
stock while minimizing the risk that a long-anticipated correction will
bring nearly immediate losses to your portfolio.
Unfortunately, investing in the stock market involves unavoidable
risk, and one of those risks is the chance that a bear market will cause
short-term losses. But by choosing investments that offer true value and a margin of safety,
you can learn how to buy stock in companies that are less likely to
cause devastating damage to your portfolio over the long haul.
What's a stock really worth?
Investing greats like Warren Buffett
and Benjamin Graham have long professed that as investors, you can't
rely on the price that the market sets for shares of stock to reflect
the actual value of the company underlying that stock. Because the stock
market is subject to constant fluctuations based on a number of
variables that include such things as supply-and-demand dynamics,
macroeconomic trends, and demographic factors, share prices can deviate
substantially from more objective methods of estimating value. (more)
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