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Rule #1 - Do not lose money! Rule #2 - Never forget rule number 1! ( by: Warren Buffet )For comments or questions please email: : admin@equityresearch.com |
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Conflicting Desires of Herd MentalityGreedCan you have your cake and eat it too? With investing, people get emotional when others are making money. They want to be in the market like their friends who are doing well. In other words, people want to make money when everyone else is. People reason that they should get their fair share. That's why, as of recent, everyone and their dog was trying to get rich in real estate. People see a trend that looks great and immediately want to join in. FearOn the other hand the same people don't want to lose any money. They only want to make money when the getting is good. The only problem is that it doesn't work this way. These two axioms are in direct confrontation with each other. You want to make money when everyone else is, but not lose money when everyone else is.You can't have it both ways. You need to decide whether you are in the herd or not. If you are in the herd, in all probability, you will not time the exit correctly, and will be in with the rest of the heard when the losses occur. Running Opposite the HerdWarren Buffet has always said, “Buy when others are fearful and sell when others are greedy”. In other words, don't follow the herd. The goal is to find value. The time to find value is when the herd mentality causes a large market downturn. The time to find value is when people are getting foreclosed on. The time to find value is when nobody has any money. So, if you hear about a good investment from someone and you can see that tons of people are following the trend. Watch out. Value is created by getting in when others are fearful. So, if your neighbor says real estate is a bad investment, then it may be a good sign. If you friend sells everything to get out of the market, it is a good sign. First and foremost, do your own homework and your own calculating. Be patient. It takes a long time to make a lot of money and a lot of patience. |
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