Which investment strategy involves buying stocks that are perceived to be undervalued?

The investment strategy that involves buying stocks perceived to be undervalued is known as value investing. This approach focuses on finding stocks that are trading for less than their intrinsic value, allowing investors to capitalize on the discrepancy. Value investors look for companies that have strong fundamentals but are currently experiencing lower stock prices, often due to market fluctuations or negative news. The goal is to purchase these undervalued stocks and hold them until their prices rise to reflect their true value, which can lead to significant returns.

Value investing is a long-term strategy, as it may take time for the market to recognize the true value of the stocks, but those who practice this technique often rely on thorough analysis of financial statements and other indicators of company health. This is different from growth investing, which seeks out stocks projected to grow at an above-average rate compared to the market. Index investing involves replicating a market index to match its performance, while momentum investing focuses on buying stocks that have shown a trend of rising prices. Each of these strategies has its own unique focus that distinguishes it from value investing.