I have been reading the book 'Profit From The Panic' by Adam Khoo and have come across this small section on 'The Investing Philosophy of the World's Greatest Investors' on Page 99.
It says that all of the most successful stock market investors adopt a contrarian approach, which means that instead of following the crowd, they do the opposite. In fact, buying stocks is like shopping in the supermarket and any rational buyer will prefer the stocks to be on sale before a purchase is made. Of course, how much value we place over a stock with certain intrinsic value is important, but essentially, it's the cheaper the better.
This is one of the key points of value investing, where the buying price of a stock is especially important since you are depending on that gap between the undervalued price (if it is) and the intrinsic value of the stock. In Christopher Browne's 'The Little Book of Value Investing', the idea is to purchase stock when its value is a significant cut below the intrinsic value, brought about by pessimistic market sentiment. A simple market correction will then have positive effects on the counter, and a safety bearth will also be born, should the price fall slightly.
It's always difficult to tell when the prices are low enough, but if one is in the market not to time it, but for long term investing, it'll be fairly easy to know when to buy based on trends.
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