After reading numerous books and articles about value investing, you probably have realised that value investors love to reiterate the importance of having the right psychology and philosophy. It dictates our attitude towards learning and investing. Bearing in mind about how fickle-minded and manic the market is, we are a lot more conscious about how the market is feeling and what we should be doing.

However, value investors should take a step further beyond having a good grasp of the market psychology. Just because the market is overreacting, it does not mean that the securities affected are now undervalued. The fundamental value of the company does not change much, if at all, when prices fall. The true fundamental value should remain constant before and after the fall. The only thing that may change is our judgement of the value.

In this article, we will be sharing with you 2 characteristics of