Have you ever been enticed to buy clothes when they were higher in price or when they were lower in price? What about housing? Have you been more inclined to buy when houses were getting more expensive, which would result in higher mortgage payments, or when housing prices were coming down, resulting in lower mortgage payments?
I'd bet when it comes to clothes, houses, cars, etc. you're more inclined to buy them when they get cheaper in price rather than more expensive. It makes rational sense because your money goes further. Or you could say, it costs you less to acquire the same exact things.
Yet, people throw all of this out of the window when it comes to stock or commodity investing. They only want to buy when things are getting more expensive, and when they're getting cheaper, they're not interested.
But savvy investors know to buy when the masses least desire that particular asset and to sell it when "everyone" wants to buy/own it.
So last week, I was thrilled to see a headline that read, "Gold Funds See Unprecedented 31% Slump as World Loses Faith."
Now, many investors would say, "See there, no one else wants gold so I'm justified in not wanting it either." Yet what they should be saying is, "Hey, it seems that no one hardly wants this asset anymore because there is record selling going on with it. Yet it's hard currency, sound money, which will do well over time as the dollar continues to get devalued throughout the years. So I'm going to buy some now while nobody else seems to want it."
You see, you should get excited when you start to see a string of negative headlines for an asset over time and begin to shrink back from an asset or look for a selling point when the masses think an asset "hung the moon and stars" and the headlines continue to reflect that.
It takes a counterintuitive thinking, a contrarian way of thinking, to be successful in investing. Successful investors say it in different ways, but they're all essentially saying the same thing.
Warren Buffett says it this way. "Become greedy when others are fearful and be fearful when others are greedy."
Yet, Sir John Templeton said it this way, "Buy at the point of maximum pessimism and sell at the point of maximum optimism."
And Peter Lynch said it this way, "I've found that when the market is going down and you buy funds wisely, at some point in the future you will be happy. You won't get there by reading, Now Is The Time To Buy."
He went on to say, "When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom."
So what are all these investors saying? They're all saying, buy an asset when it's cheap and no one wants it. You won't ensure you've "found the bottom," but you will ensure (more times than not) that you've seized value that one day will be realized by an outsized profit.
Here's another Peter Lynch quote. "The real key to making money in stocks is not to get scared out of them."
So the common thread is to find something that's trading at a value. Seize it when it's at a value. Know that you may not be "catching the bottom" and that's ok. No one regularly catches the bottom, not even the most famous of pros. Be patient, don't doubt yourself and stick with great assets. Don't get scared out of them and one day, they'll produce a great profit for you.
Well, that's what I'm saying about gold right now. Everyone loved it at $1,900 and the headlines were amazingly bullish for gold. Now, everyone hates it at $1,200 and you can't talk anyone into buying it. And headline after headline is grim for the yellow metal. Yet, that's when you buy.
You have to learn to go against the grain and head opposite of the crowds. It's not an easy thing to do. But you must realize that the masses get it wrong. Therefore, whatever they are doing, you don't want to be doing. And whatever they despise should be something you delve further into and deeply consider.
Gold has been despised now for 2 ½ years. When something has been despised for a long time (1 ½ years to three years), I begin to get very interested in it. So check out gold today and see what you think. I like it here.
Note: Stock investors can easily buy an exchange-traded fund that tracks gold by buying SPDR Gold Shares (GLD).
About the Author: Sean Hyman
Sean Hyman is a member of the Moneynews Financial Brain Trust. Click Here to read more of his articles. He is also the editor of Ultimate Wealth Report. Discover more by Clicking Here Now.
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