Do you think investing in a stock that is valued at 100% or 200% is a good idea? I’m going to give you my personal perspective. When I entered the stock market in 2001, there were 0.1% stocks and the value of the market at that time was around $15. Since then, the market cap has grown considerably, but the valuation principle still holds true today. Personally, if I bought a company with a valuation below $100 I would sell it just as soon as I got my shares paid off. So how do you know when to stop buying? What about that day’s earnings report, which is one of five key financial indicators of your investment’s value.
If you’re currently looking to get started in investing or could see yourself being financially independent in the future, financial independence can be a lot of things…and a lot of things can come from building up wealth. Whether you are employed or looking for employment, there’s a unique way to either pursue your savings goals or build wealth. It all starts with understanding the concept of value — what you value. Because we don’t always have enough information about the current state of things, it can be easy to over-extend our values and miss out on opportunities that may lower them.
I have been doing valuation for a long time. I was involved in the purchase and sale of a couple of businesses in the name of my first career before going into academia. I don’t think I’ve ever done a business valuation, but when the value of an entity changes, I will do it. Let’s take a look at some valuation principles that are well established today. Most important to me is that there should be no other parties involved in any transaction. No one has access to the data and I want to ensure that each party is aware that there’s something being offered.