Buying Cheap Stocks Isn't the Same as Value Investing -- It Pays to Know the Difference

Value investors seek out stocks trading at a lower price than their intrinsic (or true) value. In other words, if a company's true value is $100 per share and it's trading at $80, value investors will invest, hoping that eventually the market will price it correctly at $100 and they'll make money (a 25% gain). Investors must be careful not to confuse a cheap stock with a value stock because doing so could be costly.