Why buy low, sell high causes so much pain and confusion
Value investors are used to being patient and taking strain if they believe it is justified in the longer term
Walking the dog on Sunday, a gentleman recognised me and asked what my next column was about. I said I would look at the mindset of value investing. He was a supporter of this approach, but pointed out how some value funds simply refuse to turn, no matter what, and languish at rock bottom for way beyond the normal long-term investment horizon.
In theory, value investing is a simple concept. Perform your analysis, discover shares that appear to be undervalued, and hold them until they become fully valued. In practice it is often much more difficult because the general market direction often confounds the cleverest of analysts.
Value investing requires decisions that take time to come to fruition. Portfolio managers must demonstrate great resilience in the face of severe criticism, defending their strong conviction on sectors and/or companies they believe they have bought at good value, and continue to hold through ongoing or even worsening bad times. ..