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The Most Important Thing IlluminatedUncommon Sense for the Thoughtful Investor$
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Howard Marks

Print publication date: 2013

Print ISBN-13: 9780231162845

Published to Columbia Scholarship Online: November 2015

DOI: 10.7312/columbia/9780231162845.001.0001

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The Most Important Thing Is … The Relationship Between Price and Value

The Most Important Thing Is … The Relationship Between Price and Value

(p.29) 4 The Most Important Thing Is … The Relationship Between Price and Value
The Most Important Thing Illuminated

Howard Marks

Columbia University Press

This chapter considers a well-known requirement for successful investing: establishing a healthy relationship between price and value. For a value investor, price has to be the starting point in investment success. No matter how good an investment sounds, if price has not yet been considered, the investor can’t know if it is a good investment. If their estimate of intrinsic value is correct, over time an asset’s price should converge with its value. To be sure that the price is right, a prospective buyer should be looking at the underlying fundamental value, but most of the time a security’s price will be affected at least as much—and its short-term fluctuations determined primarily—by two other factors: psychology and technicals. The key to understanding the price/value relationship lies primarily in insight into other investors’ minds. The chapter presents comments and insights from four well-known investors and investment educators.

Keywords:   price, value, investment, psychology, technicals, price/value relationship

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