Value investors will often be attracted FTSE shares given the headline’s relative underperformance FTSE100 index and comparably affordable valuations. After all, investors want to buy companies that look affordable and offer the potential for capital gains or significant dividend payments.

Down, but not out

While share prices and the UK index may have increased since the Brexit vote, the reality is that UK shares are currently cheaper based on their value relative to reported earnings. There are many ways to address this, but to put it simply, global capital (institutions and citizens’ money) prefers other markets (especially the US) and other asset classes (such as bonds and cash) to UK listed shares.

However, many investors find opportunity in these types of disappointments. Dividend yields have now increased significantly to just over 4%, up from 3.5% a decade ago, signaling greater passive income potential. Similarly, stocks are simply cheaper in the brief term than they were and their US counterparts. Logic dictates that it will eventually get fixed.

Excited? Wait a moment

While many analysts and investors realize that FTSE shares are undervalued relative to their potential, the term “cheap” can be misleading. Investors typically make investment decisions based on a stock’s future performance. However, the economic outlook for the UK simply isn’t that exhilarating, which means many companies will struggle to deliver the kind of profit growth we can expect from the US. With this in mind, market participants may need to be more selective in their approach to investing.

Cheap for a reason

Investors basically want to find stocks that are affordable for no real reason. Companies like Diageo AND Unilever there are engaging cases. They earn most of their income abroad, but trade at a discount to their American counterparts.

Investing has a similar logic International consolidated airline group (LSE:IAG). This top-rated company, highest in quantitative models, serves airlines such as Iberia, British Airways and Aer Lingus. It serves markets in Europe, North America and Latin America, as well as, to a lesser extent, Asia and Africa.

Despite cooperation with American airlinesWith a mighty transatlantic presence and nearly the industry’s highest return on equity, the London-based company is trading at a 25% discount to its nearest U.S. counterpart.

Moreover, with an increasingly fuel-efficient fleet, a mighty track record of fuel security and favorable trends in emerging markets, IAG appears well-positioned to deliver mighty shareholder returns in the long term.

However, the company may be more exposed to the effects of regional conflicts than its U.S. peers. Russia’s war in Ukraine resulted in an augment in the costs of Europe-Asia routes. Further disruption and fuel price volatility due to conflicts will not be good for IAG.

However, no investment is risk-free. Some eagle-eyed investors may see these stocks as unjustifiably discounted.

What about getting luxurious?

Discounted FTSE shares can be a great way to start building wealth. However, building generational wealth in the stock market can take time. Achieving market-beating returns will undoubtedly put an investor on a path to wealth, especially as returns augment over time.