To start, a question for you to ponder:
What is the most important piece of information when it comes to buying a stock?
No, no, and no.
The most important piece of information when buying a stock (or any asset) is — the price you pay.
All the other aspects of an investment will fail you if you pay the wrong price.
“If you buy things far below what they are worth, and you buy a group of them, you basically don’t lose money.”
It is the investment rule that holds across all space and time: BUY CHEAP ASSETS
This is known as value investing and it has worked well historically.
“Price is my due diligence.”
How much clearer could he be?
Should I keep burying you in evidence?
I won’t, but I will answer the question that is still on your mind:
“If this rule is so important, why don’t we all do it then?”
How do you KNOW when something is cheap?
How do you KNOW when you are getting a deal?
In public markets, you generally don’t. It is very, very hard.
“What do you call a market that is down 90%?
That’s a market that was down 80% and then went down 50% more.”
Even when you think something is cheap, remember the words of Joe Grundfest, Stanford Law professor, “Eggs can always go lower.”
You don’t do that with food, clothing, or anything else, but many of you will sell when things look grim for stocks. Historically, these are usually the best times to buy.
1) Consider a small value allocation in your portfolio, or
2) Ignore value altogether and just keep buying. Dollar cost average your way to success. It’s easy and simple.
With that being said, happy investing from Of Dollars And Data and thank you for reading!