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CP1 chapter 12 Valuation of investments Introduction There are many different methods applied to valuing investments. Different investors may use differing methods depending upon their general aims and objectives of investment, the reasons for valuing the particular asset, the type of asset being valued. The ability to value individual assets is crucial for identifying whether a particular asset or asset class appears to be cheap or dear and hence we should include it within our portfolio in the first place, monitoring the ongoing performance of the individual asset to assess whether or not we should continue to hold it ie monitoring the experience of the investment portfolio. We will outline some of the general valuation methods that are used to value individual investments. Then we will cover particular approaches to valuation used for various specific investments. Finally we will consider some issues relating to the valuation of a portfolio of assets in relation to a corresponding portfolio of liabilities. An important principle here is that the methods and bases used to value assets and liabilities must be consistent if the results obtained are to be sensible.