Look at the housing prices now. Many people say its so expensive but people are still buying. In fact, its when housing prices are most expensive that everyone rushes to buy. It's the same with the stock market. Only after stock prices have risen by a lot then many people rush in to buy.
Most people follow the crowd when buying. It is this conformity which results in us always buying stocks at a high and buying properties at a high. If you want to be successful in investing, then you have to buy at the low or at least a lower price than others. If you buy at the high, you are never going to do well in any investments.
I saw this funny video which shows how easily humans conform to their surrounding. This may well be the main reason why we follow the crowd and buy at the high. Watch it and have a good laugh. Just don't let it happen to you!
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Be greedy when others are fearful , be fearful when others are greedy .
ReplyDeleteHi small time investor,
DeleteYes, i do hope i will be really greedy when others are most fearful.
Most investors are not contrarian because they lack the investment wisdom. Hopefully our blogs can change the world.
ReplyDeleteRegards,
SG Wealth Builder
www.sgwealthbuilder.com
Hi Gerald,
DeleteI'm constantly reminding myself to be contrarian at the right time. Our blogs will certainly remind others and as well as ourselves when the time comes. Somehow hope for it to come soon.
Hi I think this is called herd mentality. It's the same reason why people queue up because there is a queue. It's not logical, it stems from Maslow's heirachy of need, where we need to belong, something more biological than logical.
ReplyDeleteHi couleur.kx,
DeleteFully agreed. Humans like to belong and be accepted in a group. That's why we have peer pressure which is seen most obvious in teens. People follow the majority to play safe but sometimes following the majority may well be the worst decision.
That's why some financial authors think to be a contrarian is quite difficult. You have to be "naturally" comfortable even when your sore finger is sticking out for everybody to see. Perhaps with some practice you can. i have my doubts.
DeleteHi temperament,
DeleteYes it is hard to be a contrarian. Only when the time comes then we will know whether are we a contrarian ourselves.
hey may i know if there is a difference between permanent portfolio investing and what you are currently doing now-value/passive investing?
ReplyDeleteHi,
DeletePermanent portfolio consist of investing into 4 different asset classes namely Stocks, bonds, Gold and cash(in money market fund). Each asset class has equal percentage and an investor will rebalance each one once it reaches a target level to make it equal again.
Value investing is also different from passive investing. Value investing is an active investment strategy to buy stocks of good companies at undervalued prices.
Passive investing is more towards investing into an index fund such as the STI index. This index comprises of 30 of the largest companies in Singapore in terms of market capitalisation. Passive investing uses the dollar cost averaging strategy to but the index at a regular interval e.g monthly.
alright i see. from all your articles i suppose you practice value investing only right?
ReplyDeleteHi,
DeleteYes, you're right.
Only time and our portfolio XIRR will tell who are we?
ReplyDeleteHi Uncle CW,
DeleteAgreed. See you at the next crash ;p
As a contrarian myself, I always take a lot of heat. But that's the only logical, to me, way of trading/investing. When the market is at an extreme, the pot odds/risk reward favour the other side. It doesn't make sense to squeeze out that extra few points for a risk of so much more.
ReplyDeletePok Chow
Hi Pok Chow,
ReplyDeleteThat's right. Be fearful when others are greedy and be greedy when others are fearful.