price VS value?
This question is based off of Robert Kiyosaki’s latest article
http://finance.yahoo.com/expert/article/richricher/26878
This particular article I am very impressed with, as it has a good point about price versus value. Just because the price is going higher, doesn’t mean at all that it’s any more valuable. It may be more valuable, or it could be the same, or maybe it’s even less valuable, although the price continues to soar.
How does someone go about examining the value of things? Every chart I find on the internet is all based off of price in US dollars, which doesn’t really mean anything, since our dollars are not at a set price, and the value of the dollar can fluctuate up or down without any limits.
How can one determine the value of things, rather than the price?
You must determine what something is really worth…
In investing that means sitting down and attempting to ascertain how well a given company will perform over the long haul.
In theory a company is worth the discounted value of its future cash flows– in plain English this means that a company is worth as much as all the dividends it will ever pay out, adjusted to take into account the fact that future earnings are less valuable that current earnings (not just because of inflation but also because a dollar today can be invested and therefore is worth considerably more than a dollar earned ten years from now). Obviously it is impossible to know exactly how a company will perform over the years, but learning how to make educated guesses allows you to at least make resonable stabs at the value of a company.
Of course this is only half of investing. Once you have an idea of what a company is worth, you must then decide if it is available at an attractive price. Sometimes excellent companies are poor investments. Look for a company that is trading at significantly less than a reasonable estimate of its true value and you’ll have yourself a good investment.
Be patient, be picky and study up.
Good luck.
(Real Estate Investors) Secret Strategies 2 Win with Sellers
Download "3 Secrets Of Millionaires" For Just $9.97 For a Limited Time. Click Here For Details!
