They say the fear of public speaking is worse than fear of death. As humans, we are programmed to live socially, be together and in a community. There is no better example of our innate desire to move as part of the mob is when the market is driven by fear. We can wait for things to get better, or worse, we sell at the exact worst time.
There is great advantage in considering your investments as personal to your situation, rather than as part of the accepted view. Taking action and buying cheaper when your circumstances allow needs to be the prevailing driving influence when acquiring assets.
For example, when things are bad and people are losing their jobs, if you have a recession-proof job in health, education or Defence, this would your time to strike using your competitive advantage.
To do the same thing as everyone is the definition of ordinary.
Extraordinary people tend to walk against the crowd not with the crowd; bravery tends to get rewarded. There is nothing brave about the last buyer on the most over-hyped and over-bought region in the last gasps of a boom. Think of those rushing into Sydney and Melbourne late last year.
Shop when things are on sale – you can buy more.
You may not be able to pick the bottom of the market but you can buy when things have reduced 10%, 20% or even 30% off the top.
If you have been following the Royal Commission into the banking, superannuation and financial services industry lately, you would have seen the awful recommendation that would decimate the mortgage brokering industry. The finding was too bad to be true. That day, I bought mortgage choice (MOC) shares that had lost 30 % in one day. After intense lobbying and petitioning the government and opposition shied away from taking a hammer to the brokers. It hasn’t recovered all its losses, but I’m up 15% on my investment.
In Ben Graham’s book, The Intelligent Investor, he describes the market a being crazy – at times selling good companies on the cheap, and at other times being greedy and selling at a premium.
In the short term, the market is a voting machine but in the long term it is a weighing machine. Use your knowledge and circumstance to buy when things are cheaper and get ahead of the crowd.