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 There are many people who do not know the correct way to invest, as preached by Ben Graham and Warren Buffett. They confuse investment with speculation, day trading, dumb luck, chance, and in some cases sheer nonsense.
Value investing is an investment paradigm that focuses on a stock's true value rather than on the price movements in the stock market. Speculators bet on stocks going up and down, and there is scant difference between that and sheer gambling. Technical analysts invest money in stocks by looking at the price movements up and down, and making conclusions about where prices are headed before buying and selling. Value investors, on the other hand, just make simple decisions: are the companies in question worth buying? Is there a "margin of safety" between how much I am paying for a stock and what the company is actually worth? It looks simple but it is not, because analysing what the true value of a company is, called fundamental analysis, is very difficult and in some cases an art more than a science. It is simplified, but value investing can be taken to be simply about two key concepts, among others: margin of safety and fundamental analysis. I will be talking about margin of safety and fundamental analysis here.
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 Different sources define value investing differently. Some say value investing is the investment philosophy that favors the purchase of stocks that are currently selling at low price-to-book ratios and have high dividend yields. Others say value investing is all about buying stocks with low P/E ratios. You will even sometimes hear that value investing has more to do with the balance sheet than the income statement. In his 1992 letter to Berkshire Hathaway shareholders, Warren Buffet wrote:
We think the very term "value investing" is redundant. What is "investing" if it is not the act of seeking value at least sufficient to justify the amount paid? Consciously paying more for a stock than its calculated value - in the hope that it can soon be sold for a still-higher price - should be labeled speculation (which is neither illegal, immoral nor - in our view - financially fattening).
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 Stock brokers, financial advisers and planners, analysts and strategists and commentators and speculators regularly express the opinion that this security (or market sector or market as a whole) is “undervalued” or that that one is “overvalued.” But the prominence of value in their view of the world is much more apparent than real: virtually without exception, as a careful reading of their reports and quotes in the media makes plain, their preoccupation – indeed, their obsession – is “the market” and short-term “performance”.
Mainstream market participants almost invariably think about the market in terms of a price index, i.e., a weighted average of the current prices of the securities comprising the index. Analogously, they regard a stock not as a title to part-ownership of an underlying business but as a piece of paper whose price fluctuates over time. Performance, whether of an individual security, segment of a market or market as a whole, is defined as the change of price (usually expressed in percentage terms) from one point in time to another. Accordingly, the more an index increases (or the greater the rise of a particular asset’s price) the better its performance. Conversely, the smaller the rise (or the greater the decrease) the more negative the interpretation. And if Index A (say, Jack’s portfolio) increases relative to Index B (Jill’s portfolio or some market index), then A has “outperformed” B.
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