Value investing is basically buying a stock for 50 cents when it is worth a dollar. This very concept is not limited to stocks only. It can be expanded to be used in everyday life as well. I recently used this concept to buy a new smartphone.
I was looking to get a new smartphone some time back. I was researching into the various smartphones and narrowed the selection to Samsung Galaxy S3, HTC One X and Motorola Razr Maxx. I eventually settled for the Motorola Razr Maxx after researching thoroughly into the features and contemplating day and night. Razr Maxx cost me only $118 with a two-year plan after trading in my old Nokia E5. Samsung Galaxy S3 would have cost me $398 and HTC One X, $288.
I settled for Razr Maxx not only because it is inexpensive but also because it is a decent smartphone with a dual-core 1.2GHz processor, 4.3″ screen, 8MP camera, Android Ice Cream Sandwich Operating System, a huge 3300mAh battery, among other features. If I were to get Galaxy S3 or One X, I would need to pay so much more for superfluous features and hardware that I will not utilize. I do not need the quad-core of a Galaxy S3 or One X. Even my desktop computer is using a dual core system and buying an expensive quad-core phone is asking for too much! The screens of Galaxy S3 and One X are a little bit bigger than the Razr Maxx but Razr Maxx’s 4.3″ is huge enough for me. Galaxy S3 and One X sport a better camera but I’m not a camera buff.
I believe Razr Maxx is selling at such a low price due to its brand. If only the phone was manufactured by Samsung, HTC or any of the bigger Android boys, it would be selling for a much higher price. Therefore, comparing all the features and considering the price of $118, Razr Maxx is certainly undervalued or in layman’s term, is value-for-money.
Another thing to note is that by buying a cheaper alternative instead of One X, I saved $170. Investing this $170 at in a fund that yields 10% per annum for 10 years will bear $441. This is not something to scream about but I rather invest the difference than splurge on expensive stuff that I will not utilize fully.
You can use the same value investing concept as above to purchase other goods such as clothing, electronics and many more. For example, instead of going for $6 Starbucks coffee everyday, you could go for the cheaper alternative at a coffee shop. Think of how much you would save over a span of a year. You can invest the difference and lead a better financial life.
Note: I’m not promoting Razr Maxx. I’m just using it as an example to show how to use the concepts of value investing to purchase everyday goods and still enjoy your life