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“I constantly see people rise in life who are not the smartest, sometimes not even the most diligent, but they are learning machines. They go to bed every night a little wiser than they were when they got up and boy does that help, particularly when you have a long run ahead of you.” – Charlie Munger

The reason I started the article with that quote is because I truly believe in the importance to never stop learning- right now I am embarking on understanding the key lessons learnt in a book by one the greatest finance professor of all time who is specifically good in one area on investing- valuation of investment assets- Professor Aswath Damodaran.

Aswath Damodaran www.christopherleesusanto.com

Professor Aswath Damodaran

Picture source: Google

Investment Valuation 3rd Edition (974 Pages) www.christopherleesusanto.com

Investment Valuation 3rd Edition (974 Pages)

Picture source: Google

For those of you who would like to read it, he has it on his website for FREE. Just click here.

For those of you who are new to investing, let me start with a simple three-paragraph to introduce you to valuation:

Every asset has a value – and the key to successfully investing in and managing these assets lies in understanding not only what the value is, but the sources of the value- albeit uncertainty would always be present in valuation. Some assets are easier to value while some assets are harder and with each asset, different information would be required to value that asset. However, the basic principles of valuation remain the same.

Some people argue that valuation of an asset is irrelevant as long as there will be someone who is willing to pay for the asset we bought earlier. However, this is very dangerous because there is no guarantee that such person will still be around when the time to sell comes.

The core idea of a successful investing is that we do not pay more than what the asset is worth. Some people may argue that value is in the eyes of the beholder and that price can be justified as long as there are other investors who are willing to pay that price. This is dangerous – while perceptions might be important when valuing painting or sculpture, for financial assets, it should be acquired for the cash flows expected of them.

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 Further Reading:

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