Theories of Investing

There are all kinds of theories about investing in the world. Some have very good and solid points, while others seem ridiculous to a wise investor. We are going to take a look at one theory that is very good, as well as one that really does not make any sense when you really think about it.

A very good theory is called value investing. It has been around for quite a while, and the name pretty much says what it is about. It is looking for good/great stocks that are being offered at a major value. It can be hard to find some of these stocks, but they can really pay off.

A theory that many people support, but really has no basis is called the efficient market theory. This basically says that no matter what, the market is always accurate. For as common as this theory is, you will be surprised at really how silly some of the ideas in it are. We will also learn about a speech given by Warren Buffett that really helps to show the inaccuracy of this theory.