We humans are so weird. When there’s a store that is holding a sale, we run towards it and even buy things we don’t need.
But when there’s a sale in the stock market and stocks and indexes are undervalued, we run away.
Stock market is the only place where we are afraid of the sale season
Of course, the reasoning that we tell ourselves is:
How do we know that it’s a sale?
What if the discounts get even deeper? I would just be missing out by buying right now at potentially higher prices.
Then as the prices start increasing, we still tell ourselves “well, this could be a short-term increase and I’ll wait until the market really bottoms out.”
Of course, nobody knows when and if that’s going to happen.
We are routinely telling ourselves that we can time the market when In the back of our mind we know that even the bravest of the brave and the richest of the rich humans around the world have not been able to figure it out.
Yes, that is correct. Even Warren Buffett will tell you that he does not have that figured out.
So what do you do? Do you dive in or do you wait?
Well, since we understand the departmental store sales so well, I think we should use the same analogy.
If we see an Under Armor shoes that is being sold for $30 and we know from past experiences that its value is really $60, we pick it up. We don’t wait for the prices to go further down because we fear that the sale might go away or the shoes might no longer be available anymore.
What if we followed the same mindset when picking indexes or stocks to invest in? When we see a sale and we know for a fact that it is a sale and that the index or the stock is definitely worth a whole lot more (which definitely requires research and understanding of the particular entity), we invest!
We don’t worry about the possibility of a deeper sale which is definitely possible. We just pull the trigger now and keep it simple.
I know that what I just said above is easier said than done. It requires keeping our emotions in check and changing our mindset completely. But I firmly believe that it is definitely possible to do. Good luck to us all!