Way back in the 1700s, Baron Rothschild said this:
The time to buy is when there’s blood in the streets.
He went on to make a fortune by buying during the panic that followed the Battle of Waterloo against Napoleon, and solidified his family’s place as one of the core families of the elites, all the way to this very day.
Jim Rogers, when asked about where in the world he’s most excited about investing, always answers, “Myanmar.” News commentators are always confused about this. Why invest in Myanmar? Myanmar, formerly Burma, is a backwards, third world, military dictatorship where people regularly get slaughtered. Go watch the 2008 Rambo movie for some examples of what was recently going on there.
Buying low is good. Investing in things that are priced very low because no one else wants to buy them is good. It’s a good way to make money. Unfortunately, the vast majority of the population wants to buy into investments that are already doing well and that people are already excited about. That’s buying high, and it’s stupid. Let’s see what Warren Buffet said about this:
You pay a very high price in the stock market for a cheery consensus.
In other words, if everyone agrees with your investment decision, it’s probably not a good one. (That applies to just about all areas of life, by the way.)
This is one of the many reasons I have no money in the American stock market right now. It’s doing well, quite overpriced, and I don’t want to buy high. I only want to buy low.
When the American stock market crashes next, and it will, then I might take some of my speculative investment money and go buy some index funds. But not until then.
I mentioned a few weeks ago that I purchased some British Pounds because of the drop off caused by Brexit. I bought in at a GBP/USD value of 1.27. Today, it’s down to 1.21. As a comparison, in 2007 it was at 2.0.
Am I pissed? No. I’m buying some more. If it keeps going down in value, I’m going to continue to buy more. At the moment, the British pound is at its lowest value since the 1980s(!). If it goes lower, that’s awesome. I’ll buy more. If it goes higher, that’s awesome, and I’ll sell it at a profit.
Most people are the opposite. As an investment they own goes down, they freak out and sell it. Stupid. That’s selling low. You want to buy low, not sell low.
As it is in so many other areas of life, doing the opposite of what most people do is usually the smartest move.