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When it comes to investing, when we see a very cheap stock, our first reaction should definitely not be to buy it, but to think: Why is this stock so cheap? Most of the time, cheap stocks are cheap for a reason. Only when you understand why this stock is cheap can you determine if this is a value trap. If it's not a value trap, you can buy it. At the same time, what you also need to think about is, why can this stock be sold so cheaply? What are the motivations of sell-side analysts and institutional investors who are boosting tickets? If you don't think clearly about what competitive advantage you might have compared to these people, it's best to buy an ETF as a passive investment. Because this market might be perfect for you.
Finally, you need to understand what your DefaultStrategy is. Default Strategy means what do you do when you can't find cheap stocks? If you're an individual investor, or money from a manager's family, the best option is to hold cash when you can't find a bargain. But if you're a fund manager, your best bet is probably to buy an index fund. Anyway, you must prepare your DefaultStrategy.
Finally, you need to understand what your DefaultStrategy is. Default Strategy means what do you do when you can't find cheap stocks? If you're an individual investor, or money from a manager's family, the best option is to hold cash when you can't find a bargain. But if you're a fund manager, your best bet is probably to buy an index fund. Anyway, you must prepare your DefaultStrategy.
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cosmiclatte89 : Good insights
agree with you!