Growing Rich - Arabictrader.com

Rule 3
BUY THE BEST AT BARGAIN
PRICES
If I offered to sell you a Lexus for the same price as a Ford, you’d
probably think I was crazy. You’d also agree it was a great deal. Unfortunately,
such opportunities don’t come along very often in real
life. But they are constantly available in the erratic stock market. This
is a huge advantage for savvy investors who know how to spot a
good bargain. As Warren Buffett would say, buy good companies
when their share prices are temporarily down for bad reasons.
This rule makes a lot of sense, although the natural tendency among
investors is to follow the crowd by rushing into stocks when they are
going up, not down. This is but one reason why market timing is so
dangerous. Human nature entices you to buy when prices go up and
sell when they fall, which is the opposite of what you should do.
GROWTH INVESTING WITH A VALUE BENT
Don Yacktman once followed the herd, investing in the hot stocks
of the moment without regard to quality or staying power. “I went
through a period in college where I started to chase stocks, like the
airlines,” he says. But after losing a lot of money, he had a change
of heart. “It wasn’t me. I’m really built as a value investor and always
have been. When I had been in this business for about ten years, I
sat down one night and said, ‘Yacktman, what have you learned?’”
he shares. “I concluded there were really two major camps in investing.
The growth camp and the value camp. The growth camp tended to
own better-than-average businesses, but there was no price discipline.
The value camp, on the other hand, had a style I really admired. I
liked their attitude of buying on weakness, when things were on sale.
I also appreciated their price discipline. Unfortunately, it seemed as
if they always ended up owning residual fuel oil. They owned the