In the coming days, I will write about some common myths of investing. Many of these myths have been propagated by the fund management industry — largely because they serve its interests.
Let’s start with the first myth: “Timing of purchase does not matter.”
In the below article, a well-known money manager argues that buying a great stock at any price is acceptable. Not surprisingly, this money manager has consistently underperformed the benchmark.
https://lnkd.in/dRfnxJ9u
The example cited — Asian Paints — was an outlier and has since succumbed to market fluctuations. But why would an experienced value investor, with multiple books and accolades, miss such an obvious point? As Charlie Munger would say, the answer lies in “motivation bias” .If investors were taught to wait for the right moment — typically during a crisis — how would a fund manager gather assets? Nothing beats the human mind’s ability to justify questionable actions with perfectly biased reasoning, as demonstrated in this article.
Buying during a crisis — at a steep discount — is how real alpha is created. It’s also how you build a margin of safety if your thesis is wrong. Warren Buffett captured this perfectly:
“Big opportunities come infrequently… and when it rains gold, grab a washtub, not a teaspoon.”
The best time to invest isn’t “anytime.”
It’s when the world is panicking.
Disclaimer: The stocks cited are for informational purpose only and are not investment advice.
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