If you were buying a t-shirt, groceries, or gas (we especially feel that one lately), you would obviously be happy to spend less money to buy the exact same thing. This is one of the counterintuitive things about investing though. When share prices go down, that same rule of thumb doesn’t apply. Instead of being happy that the stocks you own (and would like to own more of) are cheaper to buy, you typically feel upset or concerned. To some extent, I think that reaction makes sense. When the share price of a stock you own goes down, it feels like you’re literally losing money. I recently read a quote from Warren Buffett that offered a great perspective on all of this though. You can read all about it here: https://www.retirewithryne.com/newsletter/strange-psychology-falling-share-prices
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8 Comments
Ned @theblindinvester · 12d
I know when I see a stock that I own fall in Price I start second-guessing myself. Was I wrong about this company? Is the management team just a bunch of clowns that had me fooled? The upside of this is that this also forces me to dig into exactly why the stock has fallen in price. The longer I do this, the more I get to refine my investing thesis and process…
Jeffrey
@investor282 · 10dEdited
Heard this many times and this analogy is the worst. That’s because shirts have no intrinsic value. It will only drop, with low prob of it going higher than what its normal price is. Stocks can double triple
K petrov@kpetrov · 11d
Not really a good example. Grocery prices are steady and constantly climbing and sales are less and less available, moreover one knows the best sale and that it will never be able to get it cheaper.
Traderjohn @traderjohn1989 · 11d
Warren has always said it best! My greatest reflection on this exact subject has been to imagine the companies I own a part of as a piece of real estate and as long as that real estate is still producing “rental income,” why not continue buying it at lower prices to enhance your income? However, with stocks that don’t yield a dividend, it is harder to stomach. Great write up as always @ryne !
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