For someone who is really into their personal finances there is nothing more infuriating than hearing someone justify an unneeded purchase by saying it was “on sale.” I don’t care if that bag or watch was marked down from $1,000 to $500 if you didn’t really need or have plans on buying the item anyway! That being said there is one thing that when it goes on sale, no one actually every buys!
Remember to Buy Low and Sell High
Benjamin Graham once said,
In the short run, the market is a voting machine but in the long run, it is a weighing machine.
It took me a little while (and maybe a google search or two) to really understand Graham’s quote. Every second of every day that the market is open the entirety of investors and traders out there are “voting” on what a company is worth. Much like a high school popularity contest (not that it is a real thing) the winners and loser for any particular day could vary greatly. Sometimes people get distaste for a particular company, sector or trading style (for example momentum stocks). However, over the long term (years, decades, and even beyond) the market will actually provide a real “weighted” value of a company.
Sometimes those two things are out of whack
If I told you a business was “worth” $100,000 with a profit last year of $33,333 but because some random country 12,000 miles away had an earthquake is now worth $80,000 with that same profit of $33,333. The first question you would ask is, what else changed? Maybe costs went up, or maybe it is just because a bunch of computers decided to sell. Either way you believe that the profit of $33,333 will either stay the same or may even increase – why wouldn’t you buy?
Of course you would…but that is the opposite of what so many people do? For us, non-professional investors, when shit is actually hitting the fan it is very hard to hit that buy button. So remember, the market is one “thing” you should buy when it is on sale!