Co-produced with Beyond Saving
There are, on average, more than 10 million trades done in the markets each day. In essence, the market price at a given moment reflects the aggregated opinion of millions of what's going to happen at some point in the future. Sometimes those opinions are right, often they are not. Just like it was once "obvious" to people that the sun revolves around the Earth and that the planet is flat, the belief of the majority did not make it true.
The heart of "value investing" is that the investor is capable of discerning when the belief of the majority is not recognizing the inherent value of an investment or group of investments.
Often, the beliefs of the majority are self reinforcing. After all, if you believe that an investment is "bad" and the price drops because others are selling, then because it's going down reinforces your belief. Or perhaps it creates enough doubt that there's something inherently wrong with your valuation. Then you sell to "cut your losses," putting even more pressure on the remaining bulls.
Those investors who identify underlying value and are patient are rewarded.
Warren Buffett summed it up in an interview with Forbes Magazine:
What good, though, is a bargain if the market never recognizes it as a bargain? What if the stock market never comes back? Buffett replies:
“When I worked for Graham-Newman, I asked Ben Graham, who then was my boss, about that. He just shrugged and replied that the market always eventually does. He was right—in the short run, it’s a voting machine, in the long run, it’s a weighing machine.
One area we see this happening right now is in the multi-family sector. The ruling narrative is that multi-family is in trouble. Landlords are going to face declining
Which Dividend Stocks To Buy?
High Dividend Opportunities is the #1 service on Seeking Alpha for the 5th year in a row. We are the most exciting community of income investors and retirees with over 4400 members. Our Immediate Income Method generates strong returns, regardless of market volatility, making retirement investing less stressful – simple and straightforward.
Invest with the Best! Join us to get instant-access to our model portfolio targeting 9-10% yield, our preferred stock portfolio, bond portfolio, and income tracking tools. Don't miss out on the Power of Dividends! Start your free two-week trial today!
