Value Investing - Buying Shares For The Long Term

Investors buy shares in Australian companies for many reasons. Some buy stock in a company simply because they think the share price will go up, some may purchase based on the advice of their stock broker and some may even take the plunge based on a tip they received down at the pub on the weekend. However, today I'd like to discuss an alternative approach to the Australian stock market called value investing.

Value investing is an investment strategy or paradigm based on the teachings of Benjamin Graham and David Dodd going right back to the major sharemarket crash and subsequent great depression in 1929. In a nutshell, it involves buying shares at prices which are a significant discount to their intrinsic or underlying value based on fundamental analysis.

Buying American Shares

Why should you consider buying US shares and how do you go about making your purchase?

The Australian stock market makes up only a couple of percent of world equity markets by market capitalisation while the US stock market is a whopping 30% (based on some figures I found relating to values back in early 2007). This is a marked contrast and may give you an insight into why you might consider buying American shares.

Apart from being a much larger stock market by market capitalisation and having an economy many times larger than Australia's, there are many more companies listed on US stock exchanges including some of the largest in the world.