1: value definition
2: how value works
3: value vs price
4: value example.
Opening information:
Value means the worth of some material or the usefulness of certain items.
The worth of the item is based on how the specific item is used or involved in the people’s life.
this article contains information about what is a value, how value works in the stock market, what is the difference between value and price, and finally value for the example.
1: value definition
Mr. Nothing is a person who doing the oil business for decades. Mr. Nothing didn’t have big profits in his oil business, but you might wonder, why Mr. Nothing had a doing an oil business even when he knew that he was getting low profits selling oils.
Because Mr. Nothing had love and was more passionate about the oil business, over time he started to understand the worth of oil increased consistently because of the high demand among the People.
Mr. Nothing sees the worth of the oil would dramatically have a great future because of consistent growth. So he made a contract with one big oil producer by paying some premium amount in advance like insurance coverage for the next 10 years.
The oil producer thinks Mr. Nothing is a fool, because he is paying 1.5 Million dollars in advance to the low amount oil producer in the United States.
All because to buy the oil at the price today for the next ten years.
All the oil producers inside the USA and outside the country think it didn’t have any big growth because everyone focused on the price of the oil.
As long the producer of the oil would accept the contract with Mr. Nothing to produce oil for the next 10 years under the standard price.
Over time after 7 years, Mr. Nothing’s oil business made 1 billion dollars in profits alone. Whereas other oil business owners made 150 million dollars in profits.
Mr. Nothing made 850 million dollars more than current business owners who do the same oil business. This makes the Mr. Nothing industry lead to extraordinary growth.
It’s all because Mr.Nothing Understands the value of the oil. Now let’s have a deep dive into how the value works in the stock market.
2: how value works
Any rational Investors who look into investing in the stock market where most likely to analyze the financial statements of the industry.
Because the investor would understand buying the shares of the business in the stock market at the right price, would lead to make a great return on their investment.
Investors who know the value of the business would play the game of investing completely differently.
Not all the business of the shares could be traded at the right price with reasonable securities. The market is most of the time irrational, it does not produce and offer the right price for the item.
The Investor who bought the shares of the stock at lower than its worth didn’t have any single loss on their investment.
Even if the Investor who bought the stock of the business at the right price loses money on the investment, the person who bought the shares under its worth it very hard to lose money in the stock market.
Because of the certain value, Investors would buy the shares at the very low price of their worth. The Main problem is most importantly majority 90 percent of the investors think that price and value are the same things.
So let’s have a good look on what is the difference in the value and price.
3: value vs price
The value and price have a big difference, people around the world always see everything based on the price. Most likely, the majority of them missed and did not know the value of something.
Price is the money you provide or pay to someone to acquire some materials. When the situation or circumstances of the economy change, the price changes too.
But the value for certain items is fixed, it doesn’t mean people actually like a price that is pasted on every item you purchase.
The value is the worth of something that highly likely won’t be lost without any strong reason.
To make you more clear about the value, let’s jump into one clear example.
4: value example.
Say Smith is a stock Investor who fundamentally understands and buys or purchases every stock for his Investments.
He understands that a company’s K book value which means the actual worth of the company is $42 per share.
Purchasing the company k for 42 dollars per share would be a decent amount for Company K.
When the Smith understands and goes to purchase the stock of shares, it’s trading at the $20 in the stock market.
The company K shares are trading well below their worth, if Smith purchased the stock now at 20 dollars, Smith most likely wouldn’t face loss because of buying the shares under their real worth.
Non-Market rule: #100114
Value is the concept that is used to evaluate each material including the bNon-Marketluation, so any decisions you make based on the value of anything are completely responsible from your side, you couldn’t raise any compliance.
If your investor and not comfortable or aligns investing with based on market rules please learn about how to regulate your investments under your control with the use of Rule investing.