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© Ethan Bloch

No one can deny the investing prowess that Warren Buffett holds and his inherent ability to choose stocks that make money, allowing him to amass his multi billion dollar fortune. There are many maxims that have been made famous by Buffett and have been reproduced reiterated by investors all over the world for many years. With one of his most famous being:

Rule number one: Never lose money and Rule number two: Remember rule number one.

This simple maxim is the fundamental idealogy that is followed by investors worldwide, to allow them to cash in on the right opportunities at the right time.

You can read more on how investors have been influenced by the Warren Buffett method of investing here.

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© hectorir

When it comes to value investing, there are certain risks involved that need to be reviewed by any value investor before committing to investing large sums of money. One of the risks include the business risk. This means that investing money for the business might come undone. Long term investments can become a huge 'value trap' where individuals who have invested individually use the same skills and patterns to measure business investments. This is a very dangerous situation to be in and needs to be carefully and skillfully completed without any major losses.

You can read more risks before you become a value investor here in a recent article that outlines in more greater detail the three top risks.

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© Katrina.Tuliao

Risk is an integral part of any investment activity. Even though there are inherent risks in making investments, especially for stocks, there are ways to still be very confident in making any investment. According to the pioneer of value investing, Ben Graham, risk management can be obtained while stock investing through the concept of the margin of safety.

The margin of safety is defined as the difference between the intrinsic value of the investment and the market value of the investment. While the market value of a stock is relatively easy to find, it is the intrinsic value which can be difficult to calculate. In his book, Security Analysis, Graham asserts a formula for using the price to earnings ratio of a company to then determine the intrinsic value.

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