Ignoring Valuation
Although it's certainly possible that another investor will pay you 50 times earnings down the road for the company you just bought for 30 times earnings, that's a very risky bet to make.
Sure, you could have made a ton of money in CMGI or Yahoo! during the Internet bubble, but only if you had gotten out in time. Can you honestly say to yourself that you would have?
The only reason you should EVER buy a stock is that you think the business is worth more than it's selling for - not because you think a greater fool will pay more for the shares a few months down the road.
The best way to mitigate your investing risk is to pay careful attention to valuation.
If the market's expectation are low, there's a much greater chance that the company you purchase will exceed them.
Buying a stock on the expectation of POSITIVE NEWS FLOW or STRONG RELATIVE STRENGTH is asking for trouble.
Ignoring valuation will come back to haunt many people in the subsequent years.
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
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