Even if the market rejects it, one must bravely persist.

We learned in our basic course in microeconomics that the demand curve slopes downward, meaning that as the price increases, the quantity demanded decreases. In other words, when prices are high, the quantity demanded is lower, and when prices are low, the quantity demanded is higher. This makes perfect sense, which is why stores perform better when they run sales. While this operates in many places, it is far from the case in the investment world. Here, many people prefer to buy assets when prices rise because they feel it confirms their decision; conversely, they are less inclined to buy when prices fall because they begin to doubt their initial purchase decision.

No one can comfortably face a loss. Eventually, everyone starts to wonder: “Maybe I’m wrong; the market is right.” The most dangerous moment is when they begin to speculate: “It has fallen too much; I better get rid of it before it becomes wallpaper.” This is the mindset that leads to market bottoms… and triggers frenzied selling pressure.

In a falling market, there are two fundamental elements to profiting: you must have your own view on the intrinsic value, and you must remain steadfast, bravely buying even when the price drop suggests you are wrong. Oh, and there is a third element: your view must be correct.