In 2007, I graduated from college without having a clue as to what I wanted to do with my life. So I just followed what others were doing and enrolled in the Chartered Accountancy (CA) program. The Indian CA program is rigorous not just because of its tough exam structure, but also because you have to go through the grind of a 3-year internship at the same time. So much so that, one gets little time to do anything else in the prime years of his life.

By the time I completed the CA program in 2011, I was working at KPMG India in the corporate tax division. It was a cushy job and though I liked tax, I knew I couldn’t continue with what I was doing, for the rest of my life. I wanted to be financially independent and had somehow developed the notion that by learning about investing, I would be able to.

And so, against the wishes of my family, I quit my job – With no plan. Again!

The journey (and the frustration) begins

Today, the world makes “not having a plan” sound very romantic but having experienced it first hand, let me assure you, it’s not. It’s a tough road but I was lucky in one aspect – I at least knew the goal. The only issue was where to begin.

A friend of mine suggested that a good way to start would be to learn about valuation from Prof. Aswath Damodaran (Prof. D) – a famous professor at New York University who shared all his class videos online, for free. And so, I began.

I’d thought that with an honours in commerce and a CA degree under the belt, it would be easy to grasp the concepts of valuing a business. That couldn’t have been farther from the truth! All concepts that Prof. D talked about – DCF, risk free rates, equity risk premiums, risk, etc. were at a depth I had never experienced before in university. It was too tough to handle and thus, I just left it in between to try some other approach.

The diversions in between

Now, I started reading voraciously and also started meeting people who dabbled in the stock market, in order to learn their secrets of investing. The more people I talked to, the more theories they had and the more confused I became. On the one extreme, some vouched for technical analysis – that market movements are based entirely on price and volume action and that fundamentals are nonsense. On the other extreme were people who absolutely hated chartists and believed that the only righteous way to invest was to be a value investor – i.e. being a disciple of Ben Graham, Warren Buffett and the like.

I tried technical analysis first (purely because it seemed easier!) and quickly found that I wasn’t comfortable investing money only based on charts without knowing anything about the business.

And then I began reading about Warren Buffett and other value investors. At first, they seemed to make much more sense than the chartists did. Thinking about investing as buying a small portion of a business is a powerful idea. By early 2015, I had read enough investing books to know all the typical value investing jargon – cigar butts, moats, great businesses at reasonable price, intelligent fanatics, etc. These concepts were all fine but I was still unable to use them in valuing a business. Without an underlying framework, I found that I was investing mostly on borrowed ideas and would justify my decisions based on the above catchphrases from the gods of value of investing. Although it did make me sound intelligent at dinner parties, I was still not confident about investing.

I was driven back to Prof. D’s framework. Equipped with more knowledge, I was able to understand things better than before but it still wasn’t enough. I gave up yet again! I figured that I needed a deeper grounding in finance if I had any hope of getting better at investing. So, I enrolled in the CFA Program in 2015.

Back to Prof. Damodaran and this time things start making sense

In June 2016, after passing Level II of the CFA Program, I gained enough confidence to try my hand at Prof. Damodaran’s valuation class one last time. I forced myself to watch his videos for a month with the resolve that I would not give up in between, even if nothing made sense. And lo and behold, things started falling into place. I did not “get” everything but, his videos were making a lot more sense than they ever had before. I was able to connect what he was teaching with what I had been reading in various investing books.

Apart from just watching the videos and taking notes, I did one thing differently this time – I started building a valuation model from scratch. It was tempting to just play around with Prof.’s valuation models than build my own but, building the model from the ground up allowed me to get a deeper understanding of a discounted cash flow valuation and the drivers that affect the value of a business.

Things were looking much more promising now…

It was meant for me! Prof. Damodaran starts an online program

I was much more confident now of my ability to find investing ideas but still felt the need of a mentor – a mentor who could guide me, clarify my doubts and challenge me.

And just like that, the stars aligned for me. Prof. Damodaran announced that he would start an online version of his regular valuation class at NYU. It meant that just like his regular class, online students would be able to interact with and get evaluated by Prof. himself.

Not wanting to let this opportunity go, I quickly applied for the course. Since this was a pilot course, NYU had decided to restrict the number of students taking the class. Unfortunately, I wasn’t one of them. Not wanting to take no for an answer, I wrote to the admissions committee at NYU requesting them to reconsider my application. I wasn’t expecting much of a response but to my surprise I got an email the next day that I was being admitted to the course. And the rest as they say is, history.

The result and the surprise

Apart from the course itself, I liked participating in the forums getting to interact with fellow students, whether it be learning from their experiences or answering their queries. All in all, I was getting everything from the course that I had hoped for and was thoroughly enjoying it. But what did surprise me was how successful I would end up being. I scored a 100% across three quizzes, a final exam and a valuation project. But the icing on the cake was when Prof. Damodaran himself offered me the chance to assist him in the next session of the class which started earlier this month!

It seems almost ironical that I am now helping students in a class with which I had struggled for so long!

The lessons learnt

My valuation journey is not complete by any means. In fact, it has just started and I have much more to learn! However, I’d like to conclude this post by sharing some of the lessons I learnt on my way about investing and life in general:

  1. If you like something, persevere with it. Even if you feel frustrated you aren’t “getting” it at first, just persevere. If you truly put your mind to it and you like something, there will come a time when you suddenly “get” it.
  2. Focus on understanding the first principles before you move on to other things.Your understanding of concepts and your ability to critically analyse someone else’s argument is greatly enhanced if you truly understand the first principles of your subject.
  3. Spend more time thinking than reading/ watching videos. This is especially true today since there are many interesting articles/ books/ videos about your subject. Know that the first principles and fundamentals of your field are contained in only a handful of books. Read them. Contemplate about what you read. Read them again. Contemplate again and so on. That’s 80% of the work done.
  4. As a follow up to point 2 and 3 above, don’t be intimidated by others who claim to have read a new book every week (if not more). It is more important to be focused and “understand” a few books rather than just reading more and more. Remember that reading is just a means not an end in itself. You get a lot more by thinking about what you read rather than the reading itself.

6 thoughts on “How I learned the craft of valuation and ended up assisting Prof. Aswath Damodaran

  1. Hey Shashank – stumbled on this and on a couple of your DCF posts, and I very much appreciate and agree with your perspective.

    I hold a CFA charter, and I believe that it would have been very difficult to pass the 2nd level without Professor Damodaran’s corporate finance class, which I followed closely while studying for Level II.

    You are also absolutely right about first principles. Without them, nothing is possible, with them, everything is!

    At the end of the day, everything in finance (equity or debt, real estate, whatever!) comes down to carefully evaluating cash flows and discounting them appropriately.

    However – a word of caution; Betas (even bottom-up betas!) give me a queasy feeling even after all this time. I think something better will come along to measure relative risk (and I suspect it will have a more robust probabilistic foundation, possibly something to do with the SD of FCF), but as Prof. D says – and I’m paraphrasing of course – if not Beta, what else? Cheers!


    1. Hi Doug,

      Appreciate the feedback!

      On your point on betas, totally agree but with the SD in FCF, I feel we will always be pressed to get enough data to make it into a formal measure of relative risk.

      Till someone comes up with a better measure, we all have to make do with what we have 🙂

      In any case, the more I follow companies in the market the more I realise that it’s absolutely fine to be in a ballpark rather than being precise.



  2. Hello Shashank thanks very much for sharing your inspiring career journey and the pearls of wisdom you imparted. I have read your other articles DCF et al and commend you for being a clear gifted expositor of Finance.
    May I request 2 topics for future coverage- how to do reverse DCF in Excel to glean the implied growth rate in a stock.
    2) bid evaluation for mixed consideration ( stock/cash) M&A offers
    thanks and kudos for sharing the bit on After-tax interest addback in FCFF nicely done!


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