What are instincts?
Any behaviour is instinctive if it is performed without being based upon prior experience or knowledge.
Since most investors base their investing on emotions and instinct, they follow the mindset of Mr. Market. (Instinct = without knowledge).
Solution .. become knowledgeable. Base your decisions on facts opposed to emotions.
Greed Cycle
People are chasing prices ... not value.
Mindset: A quick buck is about to be made.
Fear Cycle
People are scared they'll lose everything.
Mindset: I don't k now the value of these stocks, so I'm outa' here.
How do we know how much the stock is worth? This is a tough question.
The knowledge of a stock's value allows an investor to determine if Mr. Market is Greedy or Fearful. (That's why we are here. :-) )
The key is to be greedy when others are fearful and fearful when others are greedy. - Warren Buffett.
The name of the game really is between Accumulating Shares versus Trading Shares. You want to be the person who is accumulating shares.
The stock market behaves like a voting machine, but in the long term it acts like a weighing machine. - Benjamin Graham.
Short Term: Anyone can price the stock.
Long Term: The Value becomes absolute.
Who do you think is ultimately determining the market price in the long run?
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.
Sunday 23 December 2012
Greed and Fear. Who do you think is ultimately determining the market price in the long run?
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