THE SEVEN FUNDAMENTAL BELIEFS - Belief #6

"Ninety percent of successful investing is buying right. Selling at the optimal price is the hard part. As a result, value investors tend to buy early and sell early. The market is very consistent, giving value investors the opportunity to buy right by paying a price far less; this is relative to the value they expect to receive without taking on undue risk. In order to buy right, one has to have a framework in place to know exactly when to buy and when to sell. As some have observed, “there is a sucker born every minute—and he exists to buy your investments at a higher price than you paid for them. Any price will do as long as others may be willing to pay more. There is no reason, only mass psychology. All the smart investor has to do is beat the gun—get in at the very beginning.” If you are going to buy, it is best to buy early rather than late. Buying early allows the investor to use dollar cost averaging. Dollar cost averaging is buying more shares of a particular company as the share price trades lower in the market place. Assuming that the fundamentals and the reasons for purchasing the company in the first place have not changed, dollar cost averaging can be a very powerful tool. For well-informed value investors, it boosts returns by lowering their average costs per share. It allows the investor to buy right by purchasing shares at more attractive prices."

THE SEVEN FUNDAMENTAL BELIEFS - Belief #6