Knowing the right price to pay for an asset is hard. Classes have been taught on the topic, formulas have been created, books have been written, and people still get it wrong. Sophisticated real estate investors lose money all the time. Professional stock investors generate subpar returns all the time. Finance professors fall short all the time.

Although it’s good to learn the basics of valuing assets, it’s important to remember that the established methods won’t always give an accurate answer.

There are so many variables involved in determining an asset’s true value. Misunderstanding the variables can cause me to either overpay or undervalue the asset. Paying too much can lead to losses. Undervaluing the asset can lead to not buying the asset and missing out on potential gains.

Think about the incredible feat of having to value assets today that need to perform to my expectations in the unknown future. I need to choose a ship today that will take me safely across the world through storms, sharks, pirates, and crooked shipmates.

I cannot focus on being exactly right about an unknown future. Instead, I should focus on being approximately right, having a long time horizon, finding the right teammates, buying durable assets, and creating a portfolio.

Don’t worry about bottom-ticking the asset. Just buy it at a discount to what I think it’s worth, and buy it in increments. If I buy my first batch at $10, buy the second batch at $9.

Incremental buying at a discount reinforces the fact that I don't know the exact value of the asset, but I am trying to be in the ballpark.

I know it’s uncomfortable, but I need to develop the mindset of never selling. If my horizon is forever, then the rise and fall of the asset’s value should not bother me. My focus should be on how much cash the asset pays me on a regular basis.

Look for the right team to steer the ship. Over long periods of time, the team might change, but do the best I can to start out with a solid group. People who won't throw me overboard at the first sign of distress. This quality is difficult to find because God said in the last days, men will be lovers of themselves. The best I can do is choose the least selfish team that is least likely to throw me overboard.

I need to make sure that my ship can survive accidents. Focus on buying durable assets. Top brands with great teams in necessary industries. Problems will come, so I need to make sure I have enough ammo with me.

Avoid buying melting ice cubes. That is the trap deep value investors always fall into.

Don't overthink investing. Don't overanalyze any individual asset. Like the Bible says, "He who observes the wind will not sow, and he who regards the clouds will not reap."

Build a portfolio and try to reduce my risks as much as reasonably possible. At the end of the day, dividends will get paid, and dividends will get cut. Stocks will fall, and stocks will rise. Just trust God.

My overall goal is to build a cash-producing portfolio of assets that have strong brands, pay dividends, and are bought incrementally at a discount.

The success of the portfolio is determined by how much cash it
distributes to me on a regular basis.

Don’t tie my expectations to the asset’s fluctuating price. Distributable income. That is the focus. Everything has to collapse around that.

Remember to pray for the Bronx and its success.

“By the blessing of the upright a city is exalted, but by the mouth of the wicked it is overthrown.”
Proverbs 11:11 ESV

Matthew 5: The Beatitudes is inspired by Matthew 5 of the Bible. Visit Making It Straight to watch films based on the Bible and to purchase resources to help evangelize.