In the current bear market, there are really only two paths you could be on:

In value investing, our core objective is simple: buy a good company at a cheap price.

To determine what “cheap” means, we calculate the intrinsic value of a company. Let’s say you determine that the intrinsic value of a stock is $10. Ideally, you want to buy it at a price below that—maybe $8, $6, or even $5.

So if someone offers to sell you the stock at $11, you’d say no—it’s overpriced. During a bull market, prices might soar to $15 or higher, but as a value investor, you still wouldn’t buy because it’s overvalued.

The ideal time to buy is when the price is below intrinsic value.

1. The company is fundamentally good, so the stock won't go to zero.
2. The stock price will eventually rise again.
   

So how do we know prices will eventually bounce back?

Nobel Prize-winning economist Robert Shiller from Yale University proved that if a company does well financially, its share price will eventually go up. Conversely, if a company performs poorly, the stock price will fall.

This means if you have done your research and confirmed the business is solid, the price will recover in time.

But here's the key—this is an emotional journey. During a bear market, you need to convince yourself that you are right and the majority are wrong.

Most investors lose money. So if you follow the majority, odds are you’ll lose money too. That’s why when the majority is selling, you should be buying—assuming you’ve done your homework.

Later in the series, I’ll give you more tools to help you build this conviction. For now, just remember:

• Understand the difference between price and value
• Do your research
• Trust your homework, not your emotion and what you think.