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What are the Alternatives to Value Investing?

There is two alternatives to value investing: buying a low cost index fund using dollar cost averaging and speculation.

The essence of value investing is that an investor does not more for an asset than it's worth. This is often thought to mean companies that are not growing or grow very slowly, but this postulate does not rule out investing in fast growing companies as long as they selling below their intrinsic value. Value investors can invest in cigarette buffs or great companies, companies with high or low P/E ratio, and companies with good or poor future prospects.

The fist alternative to value investing is to buy a low cost index fund using dollar cost averaging. This is an excellent alternative for now-nothing investors, or investors who can not devote considerable amount of time an effort in studying companies. According to multiple academic studies, Index funds beat the actively managed mutual funds in most of the cases.

The second alternative is speculation. Speculators subscribe to the "greater fool" theory, which argues that the value of an asset is not important as long as there is a "greater fool" around willing to buy the asset from them. This may give investors profit from time to time, but it is a dangerous game to play, because there is no guarantee that such an investor will be around when the time to sell comes.

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