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| Adrian Mastracci, president of KCM Wealth
Management, says "Let's assume that an investor can tolerate
the risk and wants to do better than the majority of investors.
That requires doing something that the majority is not doing." |
For Immediate Release
Vancouver, BC (June 17, 2002): How often have
investors wished they had bought when prices were low? Especially,
during a bear market that refuses to fade away!
Adrian Mastracci, president & fee-only investment
counsel at Vancouver based KCM Wealth Management
comments, “I know that stepping up to the plate during the
grips of a bear market means that the investor mentality is different.
This unusual behaviour is well known as the buy low, sell high concept.
However, for many investors it remains only a concept.”
“Bear markets don’t last forever,” notes Mastracci,
“Nevertheless, it takes loads of confidence to be a different
and contrarian investor. Especially, when the outlook is chuck full
of uncertainty and the majority of investors are sitting on the
sidelines.”
“We’ve had 10 bear markets since 1945,” observes
Mastracci, “Most of them are probably a distant memory for
many investors. All but forgotten.”
Mastracci touches upon some of the more notable bears:
- The 1973 oil embargo caused much chaos.
- The 1980’s real estate bruising, especially in the greater
Vancouver area.
- The 1987 Black Monday – the Dow Jones average plummets
22.7% in one day!
- The 1997-98 global currency crisis – Asia and Russia were
severely ill.
“I would say that October 1987 is the most remembered market
crash,” explains Mastracci, “However, the current bear
market has inflicted the most portfolio damage.”
“It may be hard to fathom, but there is a positive twist
to every bear market,” recounts Mastracci, “Some brave
investors buy good investments at bargain prices. Sometimes, they’re
on sale more than once!”
“Let’s assume that an investor can tolerate the risk
and wants to do better than the majority of investors,” comments
Mastracci, “That requires doing something that the majority
is not doing.”
“That something, the all important step, is buying investments
when pessimism is rampant and hardly anybody wants them,”
notes Mastracci, “Like now, when uncertainty flows like Niagara
Falls and the majority are not buying.”
“Far too often, investors kick themselves for not having
bought when prices were low. In total hindsight, of course,”
muses Mastracci.
“So, what does it take to be different?” says Mastracci,
“Well, it's quite simple, but certainly far from easy.”
Mastracci examines the 1-2-3’s of a buy low, sell high investor:
- Has the foresight to buy during a bear market, before investor
exuberance returns.
- Does the homework and sets out the course of action before
stepping up to the plate.
- Refrains from getting fancy with the investment portfolio.
- Buys investments that can be held a long time.
- Buys investments that fit the personal criteria, not the salesperson’s
criteria.
- In short, buys on sale when the herd is not.
“The desired situation before buying low is the exact opposite
of what we had in early 2000. Just recall the exuberance when investors
bought practically anything at any price,” observes Mastracci,
“Now, few are buying at practically any price.”
“Yes, things can get worse, so assume that they will,”
explains Mastracci, “That’s why investor patience needs
to be plentiful when buying low. After all, there will be bumpy
patches along the way.”
“The traits of a buy low, sell high investor are about stepping
up to the plate and spreading the investment bets when the majority
of investors are not,” suggests Mastracci, “One way
to tell is when the majority sees plenty of gloom in its forecast.”
“The train will have long left the station when the majority
of investors see clear investment directions in their rear view
mirrors,” summarizes Mastracci, “Buying low, selling
high is about being a leader, not a follower.”
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