To a Trillion(s) Dollars and beyond: A SpaceX IPO Odyssey!

    In 2001, A Space Odyssey, a movie that was well ahead of its time when it was released in 1968, Hal (the computer) famously responded to questions about his reliability with “it (mstakes) can only be attributable to human error”. I was reminded of my fallibility repeatedly as I tried to value SpaceX ahead of its initial public offering, a market debut that is shaping up as a barn-burner for three reasons. The first is that in a market where there are many young companies all trying to claim to be futuristic in their offerings, SpaceX clearly stands out as the real thing, with rockets, satellites and AI all residing under its corporate umbrella. The second is that its founder (Elon Musk) is the richest person in the world, has upended one legacy business (autos), bought a social media company as a soapbox and made his presence felt  on the the political stage. Love him or hate him, Musk is definitely not boring, and his capacity to spin business narratives that seem outlandish at first hearing. but become conventional wisdom later, clearly adds to the allure of SpaceX. Third, if the private market pricing feeds into the public offering, SpaceX could very well become the most valuable IPO of all time, joining the rarefied list of trillion-dollar companies, on listing. That said, I may be getting a little ahead of the game here, because SpaceX has not filed a public prospectus yet, and little is known about its financials other that drabs of information that have been leaked to the press. I will forge on, nevertheless, with the stipulation that this is a first iteration, and that I will revisit it, as more information comes out about the firm’s financial standing and its IPO plans.

The History of SpaceX

    You may be surprised to hear that SpaceX is older than Tesla, at least in terms of chronological age, founded on March 14, 2002, in El Segundo, California. At its founding, Musk stated its goals as reducing the costs of space transportation and travel to Mars, but was viewed as having little chance of success by the space establishment, composed then of government agencies (NASA) and a few defense firms (Boeing and Northrop Grumman). SpaceX applied the lessons of modular engineering from the software business and it launched Falcon 1, its first space launch vehicle in September 2008; that successful launch led to a NASA contract for $1.6 billion, and rescued the company from near bankruptcy. In subsequent years, SpaceX developed Falcon 9, a reusable and heavier vehicle, with the Dragon Spacecraft unit, and became the first commercial entity to deliver cargo to the International Space Station. In 2013, SpaceX launched its first mission for a private customer, and quickly secured a dominant market share of commercial launch contract market. In recent years, SpaceX has invested in an even more ambitious version (in terms of size and power) of reusable spacecraft with Starship, and while its first launch in 2023 exploded in space, the company is clearly moving towards making it functional.

    Along the way, the company added to its business mix, first with The Boring Company, a  company that specialized in building tunnels that could be used to transport people, in 2017, before spinning it off as a separate entity. More significantly, in 2019, the company launched sixty Starlink satellites, with the end game of offering satellite-based internet  services to customers, especially in areas where conventional internet service was limited. That endeavor has now grown to include thousands of satellites and had more than ten million active subscribers spread across the world, at the end of 2025. In February 2026, the company created its third business arm, with its acquisition of xAI, the parent to Grok, the Musk-developed competitor in the LLM space.

    SpaceX had a slow start financially, as its initial years were spent developing the Falcon 1 rocket, and even after that development, the dependence on the US government and commercial satellite launchers resulted in revenues growing much more slowly than they did at Tesla, Musk's other high-profile creation. Even as late as 2021, SpaceX reported revenues of just over $2 billion, almost entirely from its launch business, but Starlink's subscriber based model has allowed revenues to increase more than five-fold since, reaching an estimated $15.6 billion in 2025, with just under 30% coming from the launch business ($4.1 billion) about the rest from Starlink subscriptions and related businesses ($11.4 billion); xAI, which was acquired in 2026, had subscription revenues of roughly $100 million in 2025.  Without full financials to back up the statement, it is estimated that SpaceX generated an EBITDA of $8 billion in 2025, though with depreciation and other expenses considered, it is not clear how much (if any) operating (or net) profits the company delivered during the year.

   On the funding front, Elon Musk used a portion of his winnings ($180 million) from his PayPal exit as seed money ($100 million) for founding SpaceX, but the company has required multiple rounds of venture capital to fund its infrastructure needs. The first venture capital round of about $12 million was in 2002, but there have at least thirty additional infusions amounting to more than $12 billion. While SpaceX counts big name venture capitalists in its investing roster (Founders Fund, Andreessen Horowitz and Sequoia), it has also seen increasing investments from public equity investors such as Fidelity and public tech companies such as Google. While these venture capital investments have diluted Musk's ownership over the years, he continues to own about 42% of the equity in the company, and with differential voting rights, close to 80% of the total voting rights in the company.

Valuing SpaceX

    It is true that intrinsic valuation, at least in its discounted cash flow avatar, is much easier to do at companies that have many years of historical data and peer groups of companies in the same business, and there are some who view one or both as pre-requisites. If you adopt that point of view, it is easy to see why so many view SpaceX as a company that cannot be valued (yet), since you don't have access to even a single year of financials, let alone a long history, and there are no true competitors. In fact, it is likely that even if the financial statements are made public in a prospectus, most will continue to avoid valuing the company, using uncertainty about the future as an excuse. If you define intrinsic value as the value of a business based upon its capacity to generate cash flows in the future, there is nothing in that definition that requires either historical data or peer group information, and statistically, the fact that you face uncertainty or that you are missing information does not imply that you cannot make estimates, just that the estimates will be noisier..  I have long argued that you can estimate the value of young companies with minimal data, as long as you build a valuation around a business narrative, and accept that this valuation will change, as circumstances do, and with SpaceX, I will get a chance to put this argument into practice.

    To value SpaceX, I consider each of its three core businesses separately since they differ not just on operating metrics, but also on the competition faced  in each one.

• The launch business, which is where SpaceX was born, is still its most identifiable business, and frames the company's story not just as a futuristic company, but one that was able to overcome some of the most significant technological challenges of any start up and not just survive but thrive. SpaceX has established such a robust and long-standing cost advantage over its competitors in the business, stemming from its existing infrastructure investments and reusable rocket technology, that it had a market share in excess of 80% of the launch market in 2025. Its competition will come from some private and government-funded players, who may be able to capture market share, notwithstanding their higher costs, due to security and nationalistic concerns..
• Valuation narrative: The space launch market is estimated to be about $30 billion in 2026 and is expected to grow to $100 billion in 2036, as government and private business demand increases. SpaceX will continue to dominate the business, albeit with a slightly less dominant market share (70%, down from >80% in 2025) of the total market and as costs decrease with scale, operating margins will increase over time to 40%. (I am being conservative in my estimates, insofar as I am ignoring space travel and expanded business opportunities in space, but I don't think, at the moment, that either offers a viable path to augmenting revenues).
• The internet service business, built around Starlink, is the business that accounts for almost two thirds of the revenues of the company in 2025, and it builds on the infrastructure built for the launch business, since SpaceX has used it to launch thousands of satellites into space. At the end of 2025, Starlink had close to 10,000 satellites in space, about two thirds of the entire global count, and is adding to that number every month. That has allowed it to double its subscriber numbers to just over 10 million, in the last year, and while Amazon's acquisition of GlobalStar has brought a potential competitor into the mix, GlobalStar has a fraction of the satellites that Starlink does. The challenge for any satellite-based internet service provider is that notwithstanding the use of low-earth orbit (LEO) satellites to improve service, the broadband service lags more conventional internet technology (fiber optic and cable) in much of the world, leaving it (at least for the moment) with a niche market of rural areas, countries with damaged or no infrastructure and people on the go (airplanes, trains and cars). Thus, while the total internet service market is estimated to be close to a trillion and a half dollars globally, in 2025, satellite-based service accounted for about 1% of that market, delivering under $15 billion in revenues, with StarLink having a dominant market share. 
• Valuation narrative: The satellite internet services market will continue to grow, as technology improves service quality and transit demand for better wifi grows, from $15 billion to $160 billion (from less than 1% to 10% of  of the internet service market) over the next decade. Starlink will see more competition, but its lead in satellites and capacity to use its launch business to get more into space, will give it a substantial advantage and a market share of 75% of the overall market). The cost of customer acquisition will ease over time, as business customers become a larger portion of the business, and operating margins will approach 60% in steady state, as the unit economics are very positive.
• The Large Language Model (LLM) business, from the acquisition of xAI, has brought AI into the SpaceX story, and while that may add to the pricing excitement, Grok lags the other LLMs in terms of revenues and reach, for the moment. In terms of usage, Anthropic (with Claude), OpenAI (with ChatGPT) and Google (with Gemini) are not only more widely used than Grok, in business setting, but are further along in converting them into revenues. While Grok has been bundled into the X Premium subscriptions, and earned about $80 million in revenues in 2025, it seems to be focusing more on consumers and only on niche portions of the business market. This is the most diffuse and volatile of the three markets, in terms of potential market, since the potential market can run from the tens of billions (if they remain subscription-based) to hundreds of billions or even trillions (if they become replacements for human labor or massive productivity boosters). It is possible that Grok may concede the larger and more competitive business space to Claude and ChatGPT and focus instead on consumer subscriptions, giving it a smaller market, but one with less competition. 
• Valuation narrative: The overall LLM market will continue to grow, but more in business applications than in consumer apps, with the market size being determined by how well AI can replicate human labor and regulatory restrictions. xAI will target primarily consumer subscription revenues and niche business applications. That will give it smaller revenues ($80 billion in 2036) than its LLM competitors, but one with less competition and higher margins (50% operating margin), and less reinvestment as it avoids going head-to-head with Anthropic, OpenAI and Google for business use.
• It is undeniable that SpaceX, as a lead player in three fast-growing and volatile businesses, may be able to use its infrastructure to expand each of these businesses. The space launch business, which has generally focused on delivering commercial or government loads and satellites into outer space may become a springboard for space travel, for leisure, research or business.  With its satellite broadband offerings, the possibility exists that the technology and the reach will improve to a point where the service can compete with fiber-optic and cable broadband offerings, perhaps at much lower cost. With xAI, the possibility that Grok finds a way to outflank its LLM rivals, including Claude, Gemini and ChatGPT, in terms of business offerings may be low, but it does exist. The recent acquisition of Cursor, a young AI company in the coding space, suggests that xAI has not thrown in the towel on business applications. In truth, these are all options that may not be viable at the moment, but if they become viable, could add immense value. 
• Valuation narrative: This part of the story is built on the expansion options that SpaceX has to enter large markets, with low probability and high payoff. In a crude attempt to capture this part of the story, I will attach an expected revenue in 2036 to these other businesses of $50 billion and an operating margin of 30%. Since these expansion options, if they do exist, will not show up in the near future, the revenues from these options ramp up after year 6 (2032) in the valuation.

Pulling these storylines together as valuation inputs, I estimate the following numbers for 2036, for the three business lines and for the expansion options category:

    With these numbers in place, and using a cost of capital reflective of SpaceX's business mix (of aerospace/defense, telecom services and AI) of 8%, we can estimate the company's value:

Download spreadsheet

With my story and inputs, the value that I derive is $1.22 trillion, about 10% below the private market pricing and about a third below the expected IPO pricing, but still astonishingly high for a company with $15.5 billion in revenues in the most recent year, and a host of question marks about corporate governance. Note that in this iteration, I have ignored cash and debt, since I do not have the company's financial statements, but it is unlikely that either will have much of an impact on the value of equity for a company with this high a value for its operating assets. 

    As you can see, the SpaceX story not only has many moving parts, but is fraught with uncertainty, and without full financials, it does not have a good starting point. That said, as the story plays out, we will get more clarity, and the story will need to be reworked, with the value consequences unclear. For the moment, though, I am uncertain about every input in my SpaceX valuation, but uncertainty is a continuum, and I am less uncertain about some inputs (such as the revenues and margins in the space launch and satellite internet service businesses) than about other inputs (including the revenues and margins of the LLM and expansion businesses). If you are wondering why the cost of capital is only 8% for the company, close to the median cost of capital for a US company, it is because much of the risk here is specific to the company (thus reducing the effect in a diversified portfolio) and cuts in both directions (upside and downside). In fact, if there are outliers, they are more likely to be on the upside than the downside. With these considerations in mind, I tried to be open about how uncertain I feel about my estimates, and the results of a simulation yields the following distribution for value:

Since the simulation is centered on the same expected values for inputs as I used in my base case, it should come as no surprise that the median value, across ten thousand simulations, of $1.29 trillion is close to the base case valuation of $1.22 trillion. As the pricing for the IPO starts to gain traction, it is worth recognizing that a $1.75 trillion or even a $2 trillion pricing falls in the range of the distribution, though with little or no upside left for an investor paying that price.

    If you feel that it is best to wait for the prospectus to be filed, before doing the valuation, I understand but there are three points worth remembering. First tt is unlikely that the prospectus will contain data that will move the intrinsic value story, since none of the numbers in the reported statements will be large enough to alter the immense value coming from expectations of future growth. Second, while the prospectus will contain estimates of total addressable market and perhaps even profitability, in my experience, it will be hype; expect to see trillions of dollars thrown around nonchalantly for market size. Third, as I see it, it is not an either/or proposition, since I can value the company now, and revisit the valuation when the prospectus comes out, with the advantage being that you are less likely to be swayed by the sales pitch in the prospectus.

Pricing SpaceX

    In an initial public offering, companies are priced, not valued, by bankers (for the offering price), by investors (as the stock starts trading) and by observers to make judgments (on whether it over or underpriced). Thus, you can make the argument that the valuation, with all of its moving parts, is irrelevant, and that you should price SpaceX, not value it, if your intent is to trade on the IPO. That is a legitimate critique, but the argument that pricing somehow dispenses with the need to make assumptions about market size and profitability or does not have the same uncertainties is not. You can take issue with the intrinsic valuation because of the layers of assumptions that I had to make along the way, and I know that for many investors, either invested already in the company ,or planning to invest in it, a pricing may seem less daunting. While I sympathize, I am afraid that the uncertainty will be just as much of an issue in pricing SpaceX, and to see why, take a look at the steps in the pricing process:

At each step in the process, you will run into issues. 

• On the pricing metric front, the problem with picking a metric is an information vacuum, with only two scalars, revenues and EBITDA, available, and even if you consider the most recent private market pricing, which priced the company at about $1.25 trillion, as the market value of equity, the absence of debt and cash numbers makes it impossible to back into enterprise value. This problem should be resolved, for the most part, when the company files a full prospectus, but for the moment, if you assume that the net debt number is close to zero, the resulting enterprise value of $1.25 trillion yields nosebleed multiples of 81 times revenues and 156 times EBITDA for the company, using 2025 numbers. Even with minimalist information, there will be pricing variants that use expected revenues (or EBITDA) in a future year as a scalar, as can be seen in this graph:

There is no inherent problem with using forward numbers in pricing, as long as you do the same for all of the companies in your peer group, but in the case of SpaceX. it is inevitable that bullish analysts, unable to justify the sky high pricing values with trailing 12-month numbers, will resort to using forward pricing, and add to the bias, by inflating revenues in future years. In the graph, I have used the forecasted revenues in 2030 and 2035, from my intrinsic valuation, and the EV to Sales ratio drops from 80.13 (112.18) to 3.91 (5.47), using the private company (estimatedIPO offering) pricing of $1.25 trillion ($1.75 trillion) as the enterprise value. 

• The even bigger challenge in pricing SpaceX will be in the second step, where you have to find comparable firms (or a peer group) to base your pricing on. There is obviously no company out there that is remotely similar to SpaceX, as a composite company, and even if you break it down into businesses, it is likely that you will hit roadblocks. On the space launch business, using publicly traded aerospace and defense companies like Boeing and Northrop Grumman is a non-starter, because they are low growth, lower-margin businesses, unlike SpaceX. Palantir may seem like a logical alternative, and while it may have high growth potential, it is a data/software company that does not have the infrastructure needs that SpaceX does. On the internet service business again, there are conventional telecom firms like Verizon and T-Mobile, but the economics of their offerings are different, and they are not growth companies. In April 2026, I computed the multiples of revenues and EBITDA that publicly traded companies in the aerospace/defense, internet services businesses and technology companies trade at, and they are far lower than what SpaceX can be expected to trade at, if it goes public at $1.5 to $2 trillion:
  
  
  
  Finally, on xAI, there are other LLMs, almost all of which are private companies now, and while you can use the pricing from most recent VC rounds, you are on shaky grounds. Even if you forged ahead with a peer group of high-growth, tech companies, your pricing will almost certainly have to revolved around revenues, rather than profits, and based upon very small samples.

• The one part of pricing that you will almost certainly see is the story telling, especially with analysts who are locked into finding SpaceX to be a buy, with the pricing more of an ex-post rationalization than a analytical tool. No matter what peer group you pick, SpaceX will be priced higher than comparable firms, and to back the argument that it is still a good investment, you will hear stories of its large potential market, significant competitive advantages and profitability. All of these stories are grounded in truth, but they are empty if they remain stories. I will predict that there will be far more buy than sell or hold recommendations for SpaceX, when it does go public, with analysts doing pricing gymnastics with forward multiples, hand-picked peer groups and fairy tales to justifying their positions.

Pricing is an exercise in data analysis, and any pricing of SpaceX will reflect the statistical limitations of the data. Put simply, the only difference between intrinsic valuation and pricing, when it comes to the uncertainties you face with SpaceX, is that with the former (intrinsic valuation), you have to face up to the uncertainties and make your best explicit judgments (on revenues, margins and reinvestment), whereas with the latter (pricing), they remain implicit. If bias is your biggest adversary in assessing SpaceX, and you use pricing, it is very likely that you will find a pricing metric and hand-picked peer group to reflect your biases, and then tell yourself a story on why SpaceX is cheap or expensive.

The Bottom Line

    SpaceX is an engineering marvel that has shown its naysayers, which included almost every luminary in the space community, to be wrong. That said, for potential investors, there are lessons to be learned from watching Musk's stewardship of Tesla. As with all of Musk's creations, SpaceX will be a shape shifting entity, frustrating investors who expect companies to follow linear paths in the corporate life cycle, going from young growth to maturity; it will shift from one narrative to another, often with no advance warning, causing whiplash for investors. When I bought Tesla in 2019, after its stock had taken a beating, I described the company as my corporate teenager, and with Musk in full control, SpaceX is likely to follow the same unpredictable path. That makes it a difficult company to buy, but it makes it an even more dangerous company to sell short, as Tesla short sellers have discovered in the last two decades. With all that said, SpaceX is a unique company with immense competitive advantages, and while I would not be interested in buying at the rumored IPO pricing of $1.75 trillion, it is one big correction away from being fairly priced or even cheap. If that happens, I will be a buyer, but will do so with the recognition that this company comes packaged with a founder who is both uniquely gifted and deeply flawed, and complaining about the parts of Musk you do not like, while enjoying the fruits of the aspects that you do, is unfair.

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Spreadsheets

1. Valuation of SpaceX in April 2026 (Pre-IPO, and with limited financials)

Oil, War and the Global Economy: The Market's Narrative in March 2026

    Markets play an expectations game, and in March 2026, we saw the process play out, with all of its upsides and downsides. The month started with a war in the Middle East, which quickly percolated into soaring oil prices and dropping stock prices, but the overwhelming factor was uncertainty about almost every dimension of the war - how long it would last, what permanent changes to oil prices would emerge as a consequence and how global governments and economies would respond to these changes. As we reach the end of the month, rather than getting answers, we face more questions, and not surprisingly, markets are volatile, not just on a day-to-day basis, but in intraday trading, driven as much by rumors and conjecture, as by facts. In keeping with my view that it is during periods of maximal uncertainty that you need perspective and to back to basics, I will focus my attention on market behavior in March, and what we can learn from that behavior, as a precursor for the months to come. 

The Market Narrative in March

    We live in an age of commentary, as self-proclaimed experts offer prognostications, half-baked or otherwise, about what is to come, and the Iran war, with its mix of politics, economics and religion baked in,, has drawn a large and extremely diverse set of expert forecasts. Given the strong priors (about Iran and Trump) that many of these experts bring to the game, it should not be surprising that their views about how the war will play out and the effect on markets is driven by those priors. It is up to markets to reconcile these contradictory perspectives, and come to consensus, and I will try to extract from market behavior what the market narrative is, leading into April 2026, with the recognition that it could be wrong and change overnight in good and bad ways. That said, over the last decade, I have learned that the market is far better at making sense of complexity and uncertainty than experts are, and it behooves us therefore to listen to what it is saying.

The Oil Price Shock

    As with almost every event in the middle east, the effects of the Iran War played out first in oil prices, and oil has been the lead player in March, surging and volatile, but with disparate impacts even within that market. In the graph below, I look at spot prices on Brent Crude and West Texas Intermediate (WTI) during March:

Both Brent and WTI crude oil saw prices increase in March, but with the price of Brent rising 49.9% and WTI rising 48.6% during March, the difference between the two almost doubled during the second half of the month. That divergence reflects the two-fold effect of the war on oil supply, with the first being the shuttering of oil production in the Gulf States and the second being the effecting throttling of ship traffic through the Strait of Hormuz, a key passageway for Middle Eastern oil to Asia and Europe. While both factors push up oil prices, oil and gas production in the US, the largest oil producer in 2025 (producing 13.58 million barrels or 16% of the total), was less affected by the Hormuz closing and supply chain issues, explaining the increasing price divergence mid-month.

    There was another tea leaf to read, and it came from watching oil futures prices. In the graph below, I compare the spot prices to Brent crude to June and December futures contracts prices:

While spot and futures prices have both risen in March, the latter have gone up less, indicating that, at least for the moment, the market sees the interruptions in oil supply as more temporary than permanent, though the market does see a lasting impact even in that optimistic scenario, with December futures up almost 25% over the pre-war level.

Inflation, Interest Rates and the Economy

    The creation of OPEC and the oil price embargo in the 1970s and the subsequent inflation spiral in the 1970s is now part of market legend, and the interlude in 2022, when the Russian invasion of Ukraine, and the subsequent sanctioning of Russian oil, caused a spike in inflation rates, has made investors wary. While the effects on gasoline prices are in the news, it is one item in the inflation basket, and it is unclear still how much higher oil prices will affect inflation for the rest of the year and perhaps into next year. While we wait for the actual inflation numbers to come out, markets don't have that luxury and the early and perhaps best indicator of market expectations on inflation are showing up in interest rates. The graph below looks at 3-month and 10-year US treasuries over the course of March 2026:

The 3-month treasury bill rate has barely budged over the month, moving from 3.67% on February 27, 2026 to 3.70% on March 31, 2026, but the ten-year bond rate saw a much bigger increase from 3.97% on February 27, 2026, to 4.30% on March 31, 2026. The biggest increases in rates are in the intermediate maturities, with the 2-year and 5-year rates rising by 0.41% over the course of the month. If you view interest rates, as I do, as driven by expected inflation and expected real growth, the most plausible reading is that the market sees an increase in inflation that is persistent. If you are a Fed-watcher, though, your reading may be that the rise in oil prices has tied the hands of the Fed, lowering the likelihood that the Fed Funds rate will be cut in the coming months, but that would leave you with a puzzle to resolve. Since the Fed Funds rate, an overnight bank borrowing rate, has its biggest impact on the short end of the maturity spectrum, how do you explain the fact that short term rates have not changed much?

    The increase in interest rates is not just specific to the US, with rises in rates across other currencies, as you can see in this graph of ten-year Euro, Yen and Yuan rates:

The Japanese Yen and Euro rates are up significantly over the month, but the Yuan rate has seen no change in March 2026. Staying with the market narrative, this indicates higher inflation across countries and currencies.

    While there are many who are speculating on what higher inflation and oil prices will do to the economy, and investment banks and data services (See Moody's,  Goldman Sachs) have been rushing to update their forecasts for the US economy, the market has not been in as much of a rush to make the judgment. The economy was showing signs of fatigue coming into March 2026, with anemic growth and employment numbers, and it is possible that the oil price shock will tip it over into a recession.

The Price of Risk

    The heightened uncertainty generated by war and its consequences has played its way out not just in oil prices and treasury rates, but in the prices that investors charge for risk. In a month where the clash between greed and risk took front stage, with the balance shifting often on a minute-by-minute basis during the trading day, we also see increases in the price that investors charge for taking risk in both equity and bond markets. In the equity market, that price of risk is the equity risk premium, a topic that I talked about extensively in this post and paper, with the argument that a good measure of this risk premium will be forward-looking and dynamic. My implied equity risk premium estimates tried to capture the changes in equity risk premiums on a daily basis, and completing the assessments for the entire month, here is what the equity risk premiums looked like in March 2026:

The surprise here is not that the equity risk premium rose over the course of the month, expected given what was happening in the Middle East, but that it rose so modestly. In fact, over the course of March, the implied equity risk premium for the S&P 500 rose from 4.37% on February 27, 2026, to 4.77%  at close of trading on March 31, 2026, an increase of 0.40% for the month.

    In the bond market, the price of risk is the bond default spread, and in the graph below, I look at default spreads for seven bond ratings classes from AAA to C (& below):

Here again, the spreads increased over the month, but only modestly, even at the lowest ratings classes. Thus, the BBB default spread over the 10-year treasury rose only 0.08% during the month, from 1.07% on February 27, 2026, to 1.15%on March 31, 2026, and the high yield spread (for CCC and below) increased from 9.50% at the start of March 2026 to 10.10% at the end of the month.

    The third proxy for risk is the volatility index (the VIX) for US equities, and that measure rose during the course of March 2026:

During March 2026, the VIX rose from19.86 at the start of the month to 25.25 by the end of the month, an increase much smaller than the increases we saw in March 2020 (COVID) or in the first week of April 2025 (Tariff week).

    With the caveat that this is still mid-narrative, the bottom line from the movement in all of these risk measures is that while the market had a bad month, much of the marking down in equity values can be attributed to real concerns about higher inflation and economic damage, and is not the result of panic selling, at least in the aggregate. To back this up, I took a look at two collectibles - gold, which has a history of holding its value or even increasing during crises and panics in financial markets, and bitcoin, which has not had that history so far, but is marketed by its advocates as a potential hedge:

Gold was down 10.42% during March 2026, uncommon for a crisis month, but bitcoin was up 3.30% during the month, and it is entirely in keeping with bitcoin investors marching to their own music, though it will be interesting to see how this dynamic plays out, as this repricing continues.

Effect across Geographies

    The war is in the Middle East, but there is no place to hide from its effects. To see how the war has played out in different regions, I looked at the change in aggregate market cap, in US dollar terms, in March 2026:

You may be surprised to see Africa & the Middle East and Eastern Europe & Russia show up as the best performing markets, with about 2% decreases in market capitalization, but it reflects the dual impact of the war. While it has wreaked havoc across the Middle East, the higher oil prices that it has brought with it are providing upside for oil producers that offsets some of the damage.

    Since these dollar returns reflect local market performance as well as the strength/weaknesses of their currencies against the dollar, I looked at the US dollar's performance in March 2026:

I know that I am piling on at this stage, but I do compute equity risk premiums for other countries twice a year, once at the start and once mid-year. Given how much March has shaken up the status quo, I will make an exception and re-estimate equity risk premiums, by country, updating both my mature market premium (which I estimate from the S&P 500) as well as the country ratings, default spreads and country equity risk premiums for other countries. 

Download spreadsheet with country ERPs

It is worth noting that these equity risk premiums are computed based upon sovereign ratings, which are slow to change, as the world convulses. That has been an issue with my ERP computations for Russia and Ukraine, since 2022, with the rating for the former withdrawn and the rating for the latter frozen at Ca (Moody's); I have use a country risk score from PRS for the last two years to update Russia's equity risk premium, an have done the same for the Ukraine in this update. You can see the same issues now, with the war in Iran rocking the boat, and at least for the Middle East, there is reason to believe that the ratings may understate country risk. While none of the countries in the war zone have seen their sovereign rating change (yet), these countries have market estimates of sovereign default risk in the form of sovereign CDS spreads, I looked at the movement in those spreads during the course of the month:

Not surprisingly, market measures of default risk are more sensitive to war effects, and have risen for much of the Middle East, as worries have mounted, with bigger increases in Qatar, the UAE and Turkey than in Saudi Arabia and Kuwait. The United States has also seen a surge in its sovereign CDS spread, and the global sovereign CDS spreads have risen about 12% in the first quarter of 2026. Using these sovereign CDS spreads as measures of default spreads for this part of the world may yield more realistic equity risk premiums.

What now?

    I noted at the start of this post that the uncertainties that manifested during March 2026 about the direction, duration and effects of war are still unresolved and perhaps even grown as we start April. As investors try to navigate their way through this period, here are the questions that you will need to answer to decide where you fall in the continuum between complacency to full-blown panic:

In the complacency scenario, the war ends quickly (in days or weeks, rather than months), the damaged  infrastructure  is repaired quickly and the new regime in Iran is viewed favorably by the rest of the world, allowing the sanctions on the country to be removed, it is likely that oil prices will drop, perhaps even to below pre-war levels, as Russian and Iranian oil is freely bought and sold. In the full-scale panic scenario, the war continues for months, with lasting damage to infrastructure and supply chains and Iran's new government stays sanctioned, oil prices are likely to stay high and perhaps even go higher, the global economy will be kneecapped and parts of the Middle East (Dubai and Abu Dhabi) that had created a business and tourist friendly setting will struggle to find their balance. 

    In either case, the war has shaken up the status quo, and I see lasting consequences that go well beyond oil. The capital flows from the oil rich countries which has flowed generously to everything from AI start ups to Premier League clubs will shrink, creating down-market effects.  That money, and the funds that were set aside to build vanity projects, from ski resorts in the deserts to state-of-the-art cities will be redirected to building pipelines and securing the flow of oil. Global politics has also been roiled, and even if the war ends quickly,  there is damage that has been done to partnerships and security agreements that cannot be undone. 

YouTube Video

Datasets

1. Equity risk premium for S&P 500, by day (March 2026)
2. Equity risk premiums, by country (updated April 1, 2026)

Finding your investing lodestar: In Search of an Investment Philosophy

    When uncertainty roils markets, as is the case right now, it is natural for investors to get knocked off balance, a when off-balance, to make investment decisions that they often regret later. It is during those times that it helps to have a core set of beliefs about markets, and an investment philosophy that reflects those beliefs. You may not be able to mend the damage to your portfolio, but it will help you find balance again and make sense of the noise around you. As an investor, my investment philosophy has been a work-in-progress, but I have had an interest in how the investors around me develop their philosophies, and why differences persist. That interest was precipitated by a seminar class that I organized for NYU Stern MBAs in the late 1990s, where successful investors with very different market perspectives and investing styles presented their points of view, and students struggled to reconcile their different and contradictory points of view. In the aftermath of the class, I started working on a book and a class on investment philosophies, where the end game was not to find the "best" philosophy, but to provide a framework for investors to find the philosophy that best fits them. The first edition of the book came out almost two decades ago, followed by a second edition in 2012. In conjunction with the second edition of the book, I created a free online version of the class on my webpage in the same year, and NYU created a certificate class about six years for the class. While my core thinking on investment philosophies has nto changed, markets and the economy have, and both the book and the class have been in need of an update. I spent the last few months working on that update, and the third edition should be available at book stores in the coming week, and in conjunction, I have an updated (free) online version of the class on my webpage and on YouTube

The Origins

    In the late 1990s, I was approached by the Stern School of Business with a request to serve as the organizer for a class on investing, where MBA students would spend a session a week, for a semester, hearing from successful investors of all stripes, and discuss what they learned from that talk in a second session each week. Over the course of the semester, the class had fourteen speakers, and because of our New York location, it drew from a range of investing types. Thus, students heard from a well-known value investor one week, the manager of one of the best-regarded growth mutual funds the next, a high-profile technical analyst in the third, and so on. The speakers approached investing in very different ways and had different perspectives on financial markets and how to exploit market mistakes, but they all had been successful as investors. 

    As I led the discussion of each speaker's market views and investment practices each week, I noticed students in my class developing whiplash, as they instinctively try to incorporate the views and practices of each speaker into their thinking. As the weeks went on, that became a problem, since other than investment success, the speakers shared little in common, and their views about markets were sometimes contradictory. By the end of the class, there was a fairly large subset of the students who ended up more confused by what they had heard during the semester, rather than enlightened. As I reviewed the class, before handing it off to someone else, I took an inventory of what I had seen not just in the class, but in investing in general, and came to the following general judgments about investing:

1. There are very few active investors, who win consistently over time: Active investing is one of the most difficult games to win at, and one reason is that you match the average investor, effortlessly and almost costlessly, by investing in index funds. Active investing has the unenviable task of trying to be better than average, and by enough to cover the costs (research, data, personnel, transactions) associated with being active. Just as illustration of how much of a mountain this is to climb, take a look at the percentage of active institutional investors who beat their respective indices over the last decade:
   
   
   
   While there some active money managers who "beat the market" over a year, two years or even five, very few are able to hold on to these excess returns as you lengthen their active investing stint. Like gamblers in a casino, who strike it lucky early, but stay gambing too long, they often leave with none of their gains, or worse. Before I get a blowback, I am fully aware that that there are investing legends (Warren Buffett, Jim Simon and George Soros, to name just three), but the very fact that we can name them suggests that they are the exceptions, not the rule.
2. Even with those successful few, it is very difficult to separate luck from skill: Much as investment books and classes claim otherwise, investing results are affected by so many forces that are out of your control that disentangling how much of your final returns can be attributed to skill and how much to luck is very difficult to do. 
3. These successful investors have widely different pathways to delivering success: If you were to make a list of the investors who have had the most success in markets in the last century, I would wager that you would be looking at a very diverse group, not just in terms of how they succeeded, but also in terms of personality. The three investors I named as legends - Buffett, Simon and Soros - obviously had very different views on markets, and how to exploit market mistakes, but even with investors who are often viewed as being from the same grouping, differences remain. Buffett may have learned his early lessons from Ben Graham, but the Graham and Buffett approaches to value investing are varied, with the former more focused on screening for cheap stocks and the latter more interested in finding companies with solid moats and great management. 
4. Imitating successful investors does not seem to provide much payoff: The practices of successful investors have been probed and investigated by other investors and journalists, and some of them have dozens of books that claim to tell you the secret of their success. Warren Buffett is perhaps the winner in this race, with not only a multitude of books that track his investing life but also his annual letters to Berkshire shareholders which laid out his investing perspective in detail. That said, the investors who tried to follow in his footsteps, often imitating every aspect of his approach, have, for the most part, not been able to match his success. 

My takeaways from these assessments are two fold. The first is that there can be no one dominant investment philosophy that is the best for all investors, and any claims to the contrary, whether it be for value investing or market timing or trading, are disingenuous. The second is that there is a right investment philosophy for each individual that reflects that individual's views and beliefs about markets and characteristics as a person.

The Core Idea

      The recognition that each investor needs an investment philosophy that is tailor-made to his or her beliefs and personality became the starting point for my creating a class, and writing a book, about the topic. Before I describe what I try to do in the book, I should start with a definition of what I mean by an investment philosophy, and perhaps the best way to do that is by describing what it is not. First, an investment philosophy is much richer and more complete than an investment strategy, with the latter often coming out of the former. Thus, applying a screen to find stocks that trade at low multiples of earnings (low PE ratios or low multiple of EBITDA) is an investment strategy, but the investment philosophy that gives rise to that strategy is one that is built on markets under pricing companies with low growth or boring businesses, perhaps because investors are dazzled by growth and drawn to the excitement of newer businesses. Second, an investment philosophy is not an investment slogan. "Buy low, sell high" is an investment slogan, and a meaningless one at that, since that is the end game of almost every investment philosophy. 

    If you have been investing for a while, and have never stopped and asked yourself what your investment philosophy is, it is understandable. In fact, you may wonder why you should constrain yourself to an investment philosophy instead of looking for bargains wherever you can find them. The problem with not having a core philosophy is that is exposes you, as an investor, to a whole host of consequences, most of which are negative:

1. Chasing winners: If you don't have an investment philosophy, it is almost a given that you will find yourself drawn to whatever strategies worked best in the recent past. Your portfolio will suffer from whiplash as you chase last year's winners, whether that be the Mag Seven or technology stocks or small cap stocks, and while your turnover and transactions costs rise, you will have little to show in terms of returns.
2. Scam target: Greed is universal, and that leads us to look for ways to make lots of money with very little risk. Without an investment philosophy constraining you, you will be an easy mark for investment scams, drawn in with promises of upside with little or no downside.
3. Empty investing cupboards: If you do find an investment strategy that works at delivering returns, it is worth remembering that the clock is ticking, and that imitation and market corrections will cause that strategy to stop working, sooner rather than later. If that is all you brought to the market, your investing cupboard will be empty and you will find yourself running to stay in place. The advantage of having a coherent, well thought through investment philosophy is that you can go back to it and mine it for other strategies that may exploit the same market mistakes. Thus, if your investment philosophy is that markets undervalue boring, low-growth companies, and low PE ratios are no longer doing the trick (of finding cheap stocks), you may look for other screens (low volatility)  that find you boring companies that are mispriced.

Simply put, every investor needs an investment philosophy to guide him or her in the difficult task of trying to delivering success.

     Rather than create a laundry list of philosophies, I will use the investment process as the vehicle to describe how and where the different investment philosophies emerge from, as well as diverge:

Using this process, the choices in investment philosophies emerge:

1. Active investing versus Passive indexing: If, as we noted in the last section, doing nothing can deliver returns approximating the average, and nine out of ten investors who try to beat the average fail, there is no shame in adopting a passive indexing philosophy, where your allocation across asset classes is determined by your risk aversion and need for liquidity, and index funds fill out the rest of the dance card. It is human nature, though, to seek to be better than average, and it is perhaps that desire that drives many into active investing choices, and there are multiple pathways that they can adopt.

2. Investing versus Trading: The second divide in investing philosophies comes from the difference between value, which is driven by cashflows, growth and risk, and price, determined by demand and supply. Investing requires assessing the value of an asset, buying if the price is lower than that value and selling if it is higher, and waiting for the gap to close. Trading, on the other hand, is about gauging market mood and momentum, buying if you expect those forces to drive the price up and selling otherwise. 

Within each of these groupings (investing or trading), there are sub-groupings. Trading can take different tacks, depending on where you think that market mistakes lie. The first, price traders, use the information on prices and trading volume to detect shifts in mood and momentum, with charts and technical indicators as tools, to try and generate profits. The second group, information traders, trades around information releases, such as earnings reports, acquisition announcements or even insider trades, with some trading ahead of the news, some at the time the news is announced and some in the aftermath, all trying to take advantage of what they see as market mistakes in reacting to that information. The third group, arbitrageurs, focused on finding the same or related assets trading on different markets, looking for mispricing across these markets, and locking in that mispricing as excess returns. 

    Investors, for instance, can be drawn to value or growth, and while that difference is often stated in terms of pricing multiples, with value investors buying low priced stocks (low PE, low price to book etc) and growth investors drawn to higher growth and high priced companies, I prefer to think of the differences in terms of where each group thinks it can find bargains. Using my financial balance sheet construct, where I divide the value of a firm into the value of investments already made (assets-in-place) and investments anticipated in the future (growth assets), value investors view their odds of finding market mistakes to be greater with assets-in-place, whereas growth investors feel that their odds are better in finding misvalued growth assets:

Within value and growth investing, there are further sub-divides. Value investing can span the spectrum from passive screening, where you screen for stocks that have specific characteristics (low PE, high growth, high ROE) and label them as cheap, to more activist poses, where investors with deep pockets (individual activist, private equity funds) not only take positions in companies that they believe are under or over valued, but also push for change at these companies. Growth investing has its own version of activist investing, in the form of venture capital, invested in young, growth companies, where in addition to supplying capital for growth, venture capitalists take an active role in how these companies evolve over time and exit the marketplace (IPOs, sale to another company).

3. Market Timing vs Stock/Asset Picking: In market timing, your focus is less on individual stocks or assets and more on deciding whether a market (equities, bonds, real estate etc.) is under or over priced. Returning to the investment process, your focus is on allocating your portfolio across asset classes, based on your market views, underweighting "expensive" asset classes and overweighting "cheap" ones.  In stock/asset picking, you take the market as a given and try to find the best individual investments within each investment class for you - the cheapest stocks, bonds and real estate that you can find. There is an ironic contradiction in making this choice. It is undeniable that a successful market timer will make far more money than a good stock picker, but it is also true that it is much more difficult to be a successful market timer than it is to be a good stock picker. The picture below captures the choices in terms of investment philosophy, framed in terms of where they enter the investment process:

Even if you feel that you have an investment philosophy in place, I think being aware of how others approach markets and keeping an open mind, where you borrow parts of other philosophies and incorporate them into yours will make you a better investor.

Finding an Investment Philosophy

    Looking at the menu of investment philosophies, from passive indexing to arbitrage, my end game in my book and for the class on investment philosophies was not to advance a single philosophy or even compare them, but to provide as unbiased and complete a picture, as I could, of the data backing each philosophy and more importantly, the personal characteristics that you would need to succeed with that philosophy. 

Step 1: Views on Market Mistakes and Corrections

    The first step in finding your investment philosophy is with a view of where (and why) markets make mistakes, and how they correct them. Even the firmest believer in efficient markets will concede  that markets not only make mistakes, but sometimes make big ones, but the divergence between them and active investors lies in the nature of these mistakes. In an efficient market, market mistakes will be random, and since there is no systematic pattern to them, there is no pathway for active investors to find these mistakes, even with access to data and powerful tools. Active investors, in contrast, believe that there are systematic patterns that you can use to find these mistakes, and to exploit them for profits, with traders believing that those patterns are in the pricing and volume data and investors hewing more to fundamentals.  That said, active investors can and will disagree about the types of market mistakes, with some buying into the notion that markets learn slowly, whereas others believe that markets overreact, and it is healthy for investors to have these disagreements. 

Step 2: Pick an investment philosophy that reflects market views

    Your views on market mistakes and corrections should guide you in your choice of investment philosophies. Thus, if you believe that markets overreact to news, good or bad, you may decide to become a contrarian, either trading (by buying after bad news and selling after good) or by investing (by buying companies with solid fundamentals whose stock prices have dropped by far more than they should have). Conversely, if you believe that it is momentum, not fundamentals, that is the biggest drivers of stock price movements, you may choose to ride that wave, based on charts and technical indicators. Superimposing time horizon onto the types of mistakes that markets make, you can create a matrix of investment philosophies:

Do you have to pick a single philosophy? Not necessarily! You can meld two or even more than two philosophies together, as long as you meet two conditions. The first is that the melded philosophies have to share a core belief about market mistakes. Thus, if you believe that market s overreact, you can be a contrarian value investor, buying companies that have been beaten up in markets but have intact fundamentals, and timing your purchases right after bad news releases, when markets overreact. The second is that you have to identify which of the philosophies is your dominant one, and which one is secondary, allowing you break ties where the two push you in different directions. Staying with the melded contrarian philosophy, and assuming that the contrarian value philosophy is your dominant one, you will choose to not to buy a stock that is down 15% after a bad earnings report, if it is still trading closer to its highs than lows.

Step 3: Check for viable strategies

    Investment philosophies are a critical component, but to make money on a philosophy, no matter how well thought through, you need to devise investment strategies that can generate profits for you. In coming up with these strategies, you will confront the two realities that cause many strategies that look good on paper to fail: transactions costs and taxes. 

• On the transactions cost front, the brokerage trading cost is just a small part of the overall cost, with two other costs that can often be much larger. The first is the bid-ask spread, small for large, very liquid stocks, but much larger for smaller and less liquid investments. The second is price impact, again non-existent if you are a small investor buying or selling shares in a large market-cap company, but substantial if you are a large investor trading on an obscure stock.
• On the tax front, some strategies will create more tax costs than others, partly because of how investment income is taxed (dividends create immediate tax consequences but capital gains require trading to incur tax liabilities) and partly because of how much trading your strategy will require of you, with higher turnover generally creating more tax liability.

If you are planning on being an active investor, there is one final skill set that you will need to acquire, and that is the capacity to test whether a strategy can beat the market. The volatility in returns can sometimes create illusions, where a strategy looks like it is delivering excess returns, but those returns are almost entirely due to statistical noise.

Step 4: Check for personal fit

    Investment philosophies, and the strategies that emanate from them, come with different demands in terms of time horizon, with some requiring holding on to investments for many years and others requiring trading in minutes, different risk exposure and divergent tax consequences. Investors who choose to adopt these philosophies have to reflect on whether they are good matches, on the following fronts:

1. Capital to invest: If you are just starting on your investment journey, and have only a small amount of capital to invest, your choices in terms of investment strategies narrow. You will definitely not be able to be an activist investor, since you will have no weight (in terms of money invested or shares held) to throw around, and you may lack the wealth to buy illiquid, small companies, if that is where you think market mistakes are most often found, since you will not be able to spread your bets. The good news is that you continue to build up your capital, your investment choices will widen, and you can modify your investment strategies accordingly. At the other end of the spectrum, and this is perhaps more the case if you are managing other people's money, you can have so much capital to invest that some investment strategies become infeasible. For instance, if you are planning on investing in illiquid, small cap stocks, having billions of dollars to invest will increase your transactions costs (by increasing price impact when you trade).
2. Time horizon: Many investors, when asked the question about time horizon, claim to have long time horizons, often because they believe that it is the answer that "good" investors give. The truth is that for most investors, time horizon is as much determined by external factors, such as age, health and liquidity needs, as it is by internal motivations. If you have to pay tuition for your children or expect to have substantial hospital bills in the near future, your time horizon just became shorter, and that has to be factored into your choice of investment strategies.
3. Risk exposure: As with time horizon, the willingness to take risk is partly a function of your personal makeup and partly determined by your life standing. If you have accumulated wealth and have a job with a stable (or rising) income that more than covers your expenses, you are better positioned to take risks than if you are on the verge of retirement, and are investing money that you will be needing soon to cover your post-retirement cash needs.
4. Personal qualities: Your personality and characteristics also come into play in your choice of investment philosophy and strategies. If you are, by nature, impatient, it is unlikely that you will be able to sustain a strategy of buying undervalued companies and waiting for a long time for mistakes to correct. Similarly, if you are easily swayed by peer pressure and what the rest of the world is thinking and doing, it is difficult to be invested in contrarian causes, short-term or long-term. Finally, if your strategy requires special skills to be put into motion, you will have to either have or acquire those skills; a strategy built around finding undervalued companies will require that you know how to value companies and one built around analyzing large and complex datasets looking for mispricing needs statistical and data analysis knowhow.

When investor characteristics and investment philosophy needs are mismatched, there are two negative consequences. The first is that, lacking staying power, investors will abandon strategies well before they should, simply because they are uncomfortable with how they are playing out. The second is that a mismatch creates an emotional cost, where investors struggle with their portfolios and fail what I call the sleep test, where their portfolio's gyrations keep them awake at night.

Step 5: Keep the feedback loop open

    If you have found an investment philosophy that maps on to your market beliefs, found viable strategies that reflect that philosophy and matched it to your personal makeup, you have reached steady state, but only for the moment. That is because almost every part of this process is subject to change, some because of outside forces, and some because of personal changes.

1. Economic setting: Over time, economic settings and structures change, and investment philosophies have to adapt or even be abandoned. For instance, I have argued that technology and disruption have created winner-take-all businesses in the twenty first century, and if you buy into that argument, an investment philosophy (and strategies) built around small cap companies will no longer deliver the payoff it did in the twentieth century.
2. Market lessons: Your views on market mistakes come from looking at data and your own experiences in the market, and as a consequence, they should be revisited as markets change. Just in this century, markets have been tested by crises (the financial crisis of 2008, the COVID meltdown in 2020 and the tariff announcements last April, just to name three), and it is becoming increasingly obvious that assets across classes (stocks, real estate etc) and geographies are moving far more in sync with each other than they did in the last century. That reality has to be integrated into your market views and the investment philosophy/strategies that you use.
3. Trading microstructure: It is undeniable that access to information and trading on most assets has become easier over the last few decades. That is good, but it does come with a cost. Investment philosophies built around the assumption that most investors, especially retail and individual, would not be able to access data or trade easily, may need tweaking, adapting or even abandonment.
4. Personal changes: It won't come as no secret to you, but you will get older, the amount of capital you have to invest will change, your health and family obligations will shift, and you may even  become more or less patient or more or less susceptible to peer pressure. Those factors will all feed into your investment philosophy.

The investing world does not lend itself to absolutes. One of the red flags in investors (retail or institutional) is certitude about their investment choices and views, and an unwillingness to even consider alternatives, a sign that they will be unable to change as the world changes around them.

Book, Class, both or neither?

    I like writing, not so much for its commercial potential, but because it allows to get my thoughts in order. I wrote the first edition of my investment philosophies book in ___, and it followed a structure that I have stayed true to, in subsequent editions. I start the book, with a description of what an investment philosophy is and how it first into the investment process, moving on a foundational section, where I look at risk measures, how to read accounting statements and do intrinsic valuation, how transactions costs and taxes drain returns, and at how to test investment strategies that claim to beat the market. In chapters 7 through 12, I spend each chapter looking at a broad investment philosophy (and related strategies), examining evidence for and against each one in the data before outlining what you (as an investor) need to bring to the table to succeed with each one. I close the book, by providing the sobering counter evidence to active investing, where I look at how difficult it to win at that game and the promise and peril of alternative investments (gold, cryptos, fine art, real estate). 

If you have one of my earlier editions, is it worth upgrading? If you have the first edition, I do believe it is time, but if you do have the second edition and are budget-constrained, you can hold off. You can find the book online at Amazon and Barnes and Noble, with the latter offering a 25% discount, starting today (March 24). 

    In parallel, I developed a class that had the same content, and while the NYU certificate version of the class will cost you, I have had a free online version on my webpage, which I created in 2012. That class was in need of an update, and as I finished up the third edition of the book, I created a new version of this class, with forty two sessions covering the same material as the book. Again, if you have taken the earlier version of the class, you may find the material repetitive, but I hope that the updated data and the add ons allow for a richer experience. If you have never taken this class, and online learning works for you, it is designed for investors, individual as well as institutional, and requires little in terms of technical knowledge, and I hope that give it a shot.

The Investing End Game

    We all share the same end game in investing, which is to generate the highest returns on the capital we invest, though there are wide variations in how much risk we are willing to take and how long we will wait before cashing out. That is the definition of investment success, but given that there are so many forces that are out of our control, you can do everything right and still fail to meet your objectives, leaving you frustrated and questioning yourself. It is for that reason that a better endgame is to seek out investment serenity, where you end up with an investment path that you are comfortable with, and accept the results that emerge, good or bad.  

    I have spent this entire post talking about investment philosophies, and in case you have not noticed, I have not shown my hand, on my investment philosophy. I have never believed in hiding behind vague and opaque generalities, and my investment philosophy is built around three principles:

1. Intrinsic value matters: I believe that every asset (anything that generates cash flows) has a intrinsic value, and that with imagination and a willingness to make mistakes, you can estimate that intrinsic value for any company, from start-ups to companies on the verge of default. I believe that much of what passes for valuation in practice is pricing, where people using pricing metrics (such as PE ratios or EV to EBITDA multiples) to make pricing judgments, and that a good valuation requires understanding business models, telling stories and converting these stories into valuation inputs and value estimates.
2. Markets are for the most part right, but make mistakes during periods of uncertainty and change: I never cease to marvel at markets, where millions of individuals with disparate views and information reach consensus on a price. In an age where we have turned over our choices on what movies to watch to Rotten Tomatoes, and which restaurant to eat at to Yelp!, it is worth remembering that markets were the original fount for crowd wisdom. That said, it is also true that markets have provided us with illustrations of crowd madness, where the collective wisdom is hopelessly wrong, and I believe that this is often the case when investors face significant uncertainty, as is the case when companies transition from one stage of the life cycle to another, entire industry groups are faced with the threat of disruption and markets are put into upheaval by crises. 
3. Do no harm: While I seek out investments to make that will beat the market, I am cognizant of the reality that I am not entitled to rewards, just because I put in the work, and that luck and chance still can wreak havoc on my best-laid plans. In particular, I have learned, through experience, that my biggest mistakes come from overreach and overactivity, and I have built that learning into my investment philosophy by:
• Spreading my bets: I have written before about the concentration versus diversification argument, and that what you choose to do as an investor will be a reflection of how much confidence you have in your investment choices, or “conviction”, in investing parlance. I must confess that I don’t share the conviction that concentrated investors bring to the game, and not only spread my portfolio over three dozen stocks, but also follow rigid rules on not letting any single investment exceed 15% of my portfolio.
• Acting rarely: I don’t trade often, and when I do, I follow the old adage of measuring twice (or three times) before cutting (trading). It helps that I don’t track the market or my portfolio holdings all day, almost never watch the financial news and am not easily swayed by investment sales pitches. 
• Staying away from my weaknesses: I steer away from active market timing and sector bets for a simple reason. I am not good at either, and what I might gain from an occasional win will be wiped out by what I lose in the long term. 
• Being aware of my blind spots: I try to be self-aware, though I don’t always succeed. I know that I am thrown off my game plan by taxes (I don’t like playing them, and that sometimes gets in the way of doing what I should be doing) and I sometimes fall in love with company narratives, because I want them to be true. 

This is my philosophy, it reflects my strengths and personality, and it works for me. I sleep well at night and I have no regrets, but I am lucky since I have an clientele of one (or perhaps two) to satisfy. My hope, with both my book and class, is that it provides you with the choices and material for you to find an investment philosophy that works for you and that it delivers the returns you hope to earn, and even if it does not, lets you sleep well at night!

YouTube Video

Investment Philosophies Book

1. Webpage for book
2. Bookseller links
• Amazon
• Barnes and Noble (25% off through March 26, 2026)

Investment Philosophies Class

1. My webpage for class
2. YouTube Playlist for class