During a bull market when prices continue to rise investors become enthusiastic and continue purchasing “To hell with valuations”. - Emotion driven investing “Fear of missing out (FOMO)” takes over.... AND WHY NOT ? At the craps table, Every investor is James Bond and the croupier keeps paying out. Every chart continues it's astronomical ascent from left to right, in the immortal words of Buzz Lightyear “To infinity....and beyond!!!. Warren Buffett famously stated - “Only when the tide goes out do you discover who's been swimming naked.”
In the real world people buy more when products go on sale However, in the financial world people invest less. This is backwards thinking for the DGI investor. Buffett always enjoyed the Ted Williams baseball analogy - Ted Williams approached batting in a methodical way, he worked out his optimal strike zone where the odds were in his favor and he maintained the discipline to only swing if the ball was in that zone. By the time Ted Williams retired he had a .344 batting average, 521 home runs, and a 0.482 on-base percentage, the highest of all time.
John Bogle whom one could perhaps intelligently argue has done more to help the common retail investor that anyone in the financial industry stated - Don’t pay too much heed to the daily ebb and flow of the markets. In the short run, people get excited and stocks get way overpriced. Then a sell-off happens, the stock price goes down, and that sends [price-earnings ratios] lower. The long-term investor should pay no attention to that. The stock market is a distraction to the business of investing.
Cycles are all about excesses and their corrections. The DGI investor can benefit greatly by waiting for the right pitch in their optimal strike zone rather than chase Yield, stretched valuations, and overpriced securities; and letting “FOMO” take hold and drive their decision making during bull runs and striving to grasp for "Infinity and beyond"!! .The DGI investor should ensure to curtail their emotions when multiples/valuations become stretched and act with even greater prudence to minimize risk. The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own.- Warren Buffett
For myself when excesses in the market occur, I prefer to adopt the Winnie The Pooh's philosophy -
“Don't underestimate the value of Doing Nothing, of just going along, listening to all the things you can't hear, and not bothering.”― A.A. Milne
I believe a cup o' Joe with some nice slices of Toast and Honey is indeed in order, and awaits me in the kitchen on this cold wintry morning.
All enjoy your day,
-Scoot
In the real world people buy more when products go on sale However, in the financial world people invest less. This is backwards thinking for the DGI investor. Buffett always enjoyed the Ted Williams baseball analogy - Ted Williams approached batting in a methodical way, he worked out his optimal strike zone where the odds were in his favor and he maintained the discipline to only swing if the ball was in that zone. By the time Ted Williams retired he had a .344 batting average, 521 home runs, and a 0.482 on-base percentage, the highest of all time.
John Bogle whom one could perhaps intelligently argue has done more to help the common retail investor that anyone in the financial industry stated - Don’t pay too much heed to the daily ebb and flow of the markets. In the short run, people get excited and stocks get way overpriced. Then a sell-off happens, the stock price goes down, and that sends [price-earnings ratios] lower. The long-term investor should pay no attention to that. The stock market is a distraction to the business of investing.
Cycles are all about excesses and their corrections. The DGI investor can benefit greatly by waiting for the right pitch in their optimal strike zone rather than chase Yield, stretched valuations, and overpriced securities; and letting “FOMO” take hold and drive their decision making during bull runs and striving to grasp for "Infinity and beyond"!! .The DGI investor should ensure to curtail their emotions when multiples/valuations become stretched and act with even greater prudence to minimize risk. The less prudence with which others conduct their affairs, the greater the prudence with which we should conduct our own.- Warren Buffett
For myself when excesses in the market occur, I prefer to adopt the Winnie The Pooh's philosophy -
“Don't underestimate the value of Doing Nothing, of just going along, listening to all the things you can't hear, and not bothering.”― A.A. Milne
I believe a cup o' Joe with some nice slices of Toast and Honey is indeed in order, and awaits me in the kitchen on this cold wintry morning.
All enjoy your day,
-Scoot