Safety in numbers is the hypothesis that, by being part of a large physical group or mass, an individual is less likely to be the victim of a mishap, accident, attack, or other bad event. Click here to read more explanation. It’s extremely true for the stock market and the property market too. During good times, people think beyond the clouds and the sky; no limits. As long as the market is still hot and all their friends tell them it’s a buy, they will buy. Never mind who their friends got their info from or even having the slightest idea on the ‘why buy?’ Let’s remember there’s a huge difference between buying due to price and buying due to value. Buying based on why
During bad times, people think there is no limit to how low a market could go to. They disregard the fact that even for share prices of companies, it has assets which it could sell and sometimes these assets have a higher value than the current company valuation based on the stock price (market capitalisation)! As for the property market, the cost of producing a home could not go lower than the cost plus minimum profit margin yeah… Else, developers stop building. Last check showed that developers are still building and most continue to show profits and the lender; banks are also still operating profitably with very low non-performing-loan (NPL) numbers. Banks’ latest results
“be greedy when others are fearful” This is part of the full sentence of “be fearful when others are greedy and be greedy when others are fearful.’ It comes from Warren Buffett who is one of the most successful investors of all time. This quote will be true again and again because many will not buy in the beginning but will start buying when everyone they knew are already buying. Some will thus buy towards the peak of a cycle while those who bought in the beginning is already selling.
Property market Malaysia? 2008 is considered the starting of an uptrend and 2013 is usually referred to as the peak. This is why some who bought MANY units in 2013 and just gotten their keys are now struggling to pay the mortgages because the rental just could not cover those mortgages. (Let’s not talk about why they bought 4 units in the first place…). When we buy a smartphone, it may not be wisest to be the earliest batch of buyers because the prices usually drops and the specs and features usually gets better with time. This is buying. When we are investing, it does not matter if we are earliest or the latest. It matters only if we buy overvalued or undervalued and is ready to stay the course. Anyone who bought a property way back during the 1998 crisis and selling their properties today will still tell you it’s profitable. Happy understanding.
written on 25 March
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