When others are pessimistic and selling, buy in; when others are euphoric and rushing to buy, sell out. All of this requires the greatest courage, but it will also provide the most substantial profits.
“Buy low, sell high” is an ancient maxim, but investors who are lost in the market cycle often make the opposite move. The appropriate approach should be to adopt contrarian behavior:
- Buy when the crowd is averse, and sell when the crowd is enthusiastic.
- Market extremes of “only encountered once in a lifetime” seem to appear once every ten years. While the frequency may not be high enough for investors to make a living from it, for any investor, attempting to do so should be an important part of their trading strategy.