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The Complete Idiot's Guide to Stock Investing Fast-Track by Ken Little

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Intrinsic Value Determines Potential Success

Investors who guess at a stock’s fair market value will soon find themselves wondering where all their money went, because they will not know if they are paying too much for the stock. Smart investors buy a business, not a stock. They analyze the business using proven formulas and arrive at a price for the stock that reflects the value to investors. That price is the stock’s intrinsic value, which considers all of the company’s assets, both tangible and intangible. When you know the intrinsic value of a company, you can decide whether the stock is overpriced, underpriced, or priced about where it should be. All investors should avoid overpaying for a stock. If this seems like obvious common sense, ...

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