| Let's figure out what something is worth before we | | | | In it, in 1999, he predicted the coming stock market |
| buy it. This is not a unique concept. You do it all the | | | | crash. He also predicted the real estate crash. People |
| time for almost everything you buy. But for certain | | | | get very emotionally caught up in the stock market |
| (but wrong) reasons, that's what investors very | | | | because so much money is at stake. When the |
| clearly do NOT do when they consider buying into a | | | | market is going up, they get greedy and buy just |
| business. Well, that's not true. Investors most | | | | because they don't want to miss out on easy |
| certainly do do that when they buy a piece of a | | | | money. And they freak out when the market is |
| private business like a restaurant or a laundry. But | | | | going down and they sell because they are afraid of |
| they don't do it when they buy a piece of a PUBLIC | | | | losing everything. |
| business - when they buy shares of stock. When | | | | The key to great investing is to be rational. To NOT |
| they buy stock they assume that because there are | | | | get caught in the emotion of the moment that's |
| so many smart people buying the stock that day at | | | | sweeping the country. If we can stay rational and |
| that price, the price must be what its worth. In fact, | | | | figure out what a business is worth as a business |
| in the stock market, EMOTION is huge player. | | | | before we buy it, and then buy it for less than its |
| It's definitely not the uber-rational place its made out | | | | worth, we're going to be very successful investors. |
| to be. Robert Shiller, a Yale economist, made that | | | | Now go play. |
| very point in his best seller, "Irrational Exhuberance". | | | | |