What is a good time to buy for the long-term?
Is there some kind of formula? Mathematical equation? Algorithm?
Who doesn’t look for the holy grail?
Sure, there are technicals galore, to assist one’s buying and fix its appropriate time.
Of course, fundamentals, when studied properly, are even more helpful.
However, neither technicals nor fundamentals can replace emotion.
The emotional alarm, when sounded, is a good time to buy for the long-term.
Here you are, getting alarmed at how the markets are falling.
How are you supposed to buy with a straight face amidst the panic?
That’s just it.
Markets are wired in an opposite fashion to our mentality.
At the onset of margin of safety, our mental framework emits panic upon seeing the mayhem.
Upon the vanishing of margin of safety, the same mental framework emits euphoria and wants to participate in the rally. This is trading, not long-term investing, and as long as you buy high and sell higher, you are good. What you are not going to do here is hold your trade for the long-term, thinking it’s a long-term buy. What has not been bought with margin of safety is not a long-term hold.
Margin of safety gives us a buffer.
Let the markets fall; they still don’t reach our entry price. Or, they only fall a tad under it, and then start to rise again. That’s the beauty of buying with margin of safety. You can use the low now created to pick up some more, if you are still convinced about the stock. Otherwise, you can always exit the stock on a high.
In long-tem investing, one should not exit on a low due to panic. If one does so, it’s like market suicide.
What causes exits on lows?
Need for money.
Become a strong hand.
Put in only that money which you don’t need for the next ten years. Make sure before entry that you won’t be pulling out this money in the middle of the investment if you can help it. Have a fallback family fund to lean on ready before you start putting money into the market for the long-term.
Teach yourself not to panic. Rewire yourself alongside the market. This takes time. It took me almost a decade to rewire myself. Everyone needs to go through this rewiring process.
Once you’re rewired and financially secure, your strong mind will pick up on the emotional trigger, and will start buying when the pinch-factor kicks in.
Your strong hands won’t let go owing to panic.
In the long run, your investment, which has been made with margin of safety and proper due diligence, will yield you a fortune.