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Value lies in the difference between price and worth from "summary" of The Most Important Thing by Howard Marks
Understanding the distinction between price and worth is crucial for making informed investment decisions. Price refers to what is paid for an asset in the market, while worth is a more subjective measure, reflecting the intrinsic value based on factors like fundamentals, cash flows, and future potential. Investors often fall into the trap of equating price with worth. Market fluctuations can lead to situations where an asset’s price diverges significantly from its true value. This divergence creates opportunities for savvy investors who can identify undervalued assets. When price is below worth, it indicates a potential for profit, as the market will eventually correct itself. Conversely, a high price does not necessarily reflect a commensurate worth. Emotional factors such as market exuberance can inflate ...
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