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Perception Shapes Value in Investing
Investing is fundamentally influenced by perception, where the price assigned to an asset reflects the collective belief of investors rather than an intrinsic worth. Different companies are valued based on various metrics—earnings, sales, or user engagement—demonstrating that price equates to perceived value. Successful investors thrive on their ability to persuade others of their value narratives, emphasizing the power of storytelling in investment success. In contrast, value investors focus on the intrinsic value, derived from the net present value of future cash flows, which remains stable irrespective of market perceptions. Their challenge lies in estimating this value without the certainty of future cash flows.