Damodaran outlines a three-step process for developing a personal philosophy:
An investment philosophy is a coherent way of thinking about markets and why they make mistakes. It is broader than a strategy (e.g., "buying low PE stocks" is a strategy, not a philosophy).
Master the basics of risk measurement and valuation. Investment Philosophies By Aswath Damodaran Pdf
Minimize self-inflicted damage by spreading bets (diversification), acting rarely (low turnover), and staying away from personal weaknesses. 2. The Development Framework
Form a point of view on how markets work and where they are likely to break down. Damodaran outlines a three-step process for developing a
Every asset generating cash flow has an intrinsic value that can be estimated.
Markets are generally efficient but fail during periods of extreme uncertainty or change. Every asset generating cash flow has an intrinsic
Choose a philosophy that aligns with your specific risk aversion, time horizon, portfolio size, and tax status. 3. Key Categories of Investment Philosophies
