Investment risk rarely matches the risk perception in a security. Let’s see why.
Held long enough, the price of a security approximates its value.
Buying overvalued stocks in most cases deliver lackluster performance as the value struggles to catch up with the price. The price may decline, or if the business is growing value at a rapid pace, than perhaps there may be some price appreciation. Regardless, there is a better way to invest with less risk and more rewards
Buying undervalued stocks, in most cases deliver outstanding performance over time as the price rises to catch up with the value – as long as the business continues to create value over time