Investor Mental Models
Whenever I learn something in investing, I try to summarise what I've learnt in a single slide.
I've been doing this for years.
Here I share all my favourite mental models for investing:
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1.Introduction to mental models
- Model models allow complex data to be quickly and accurately turned intoactionable insights.
- They provide a thought process for filtering the signal from the noise and forseparating out what’s important from what’s not important.
- Presented here are a range of 1-page mental models for deciphering a range ofconcepts encountered in the world of investing.
2.What influences share prices?
3. What drives share price growth?
Operating leverage, cash conversion, share buy- backs and multiple expansion can all work together to boost revenue growth into even higher share price growth.
This example is from the credit score company $Fair Isaac(FICO)$ . Notice how their growth rates increase as you move from revenue to share price.
4.Four Essential Investing Ratios
Company A and Company B both make $1bn in free cash flow (FCF). Comparing a company’s FCF to its invested capital, revenue, historic FCF and market capitalisation reveals four important investing ratios.
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Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.
