Saturday, 25 April 2009

Buy low, improve your chances

Buy low, improve your chances


Value investors buy cheap. Why? Two reasons:

1. Provide a margin of safety.
2. Allow for proportionally better returns on dollars invested.

The most common investing mistake is throwing good money after bad. (This refers to buying a lousy company.)

The second most common investing mistake is finding and buying a great company (with growth, intrinsic value, supporting fundamentals, and intangibles all there), but
paying too much for it.

Paying too much simultaneously creates downside vulnerability and limits upside potential.

The mathematics of underperformance should be reason enough to buy cheap and provide oneself with that safety margin.

1 comment:

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