Go Launch & Learn

A good investment is anything that is worth buying because it is valued to be more profitable or useful in the future. The only difference between a good and bad investment is the valuation. Those who are able to price an asset closest to its actual value are without a doubt the best investors. It is a skill for sure, but I believe that investing is more of a science than an art. There is some degree of luck, risk, and speculation, but by and large, the investment methodology that I propose in this blog post will hold true for any investment. There are 2 values to an investment. The one that's talked about most is the "Market Value." The market value of an asset is the price where the supply meets the demand for that asset TODAY. In the chart to the left, the Market Value or PRICE of the asset is the equilibrium point. In other words, market value is the price that "A Random Someone in the Marketplace" is willing to pay for the asset at this point it time. I'll give you an example of how this works in real life. Do you remember the Tickle Me Elmo craze a few years ago? Tickle Me Elmo hit the shelves in the summer of 1996 at a suggested retail price of $28.99. Within a few weeks, the demand for the toy shot through the roof. Whenever the demand for an item increases while the supply remains the same, price or "market value" goes up. Tickle Me Elmo was selling for $1,500.00 by Christmas time in 1996. Today, you can get a Tickle Me Elmo for about $129.00 at Sears. Nobody really knows why so many  random people in the marketplace wanted to buy that stupid, insignificant tool. They just did. It's the same with Jordan's Sneaker or the Beats by Dre Headphones. Sometimes people pay stupid amounts of money for stupid products. As an investor, you have to understand market value because that's what your buyer (The Random Someone) is going to pay when you're ready to sell. Once you have the Market Value of the asset, the next thing you should do is come up with the Personal Valuation of the asset. The Personal Value reflects how much the asset is worth "IN YOUR HANDS" given your resources, skills, and expertise. For example, a fixer upper is worth more to a general contractor than it is to musician. The GC is in the business of renovating homes. He has contacts and price advantages that make the fixer upper a worth wild deal for him personally. On the other hand, a musician might jump on a studio investment because he has the ingenuity and talent to put such an asset to use. Consider the following Buy or Sell Chart

Buy or Sell
Personal Value	>	Market Value		BUY
Personal Value	<	Market Value		SELL
Personal Value	=	Market Value		SELL

The only time you should make an investment is when the asset is worth more "in your hands" given your resources, than it is to a random person without those resources. In other words, only invest when the Personal Value is greater than the Market Value.