Coby, I am not sure how to answer your question and get at what you were trying to ask exactly.
If you buy a house, does it matter what you think it is worth? Or do you put your head in a jar and never pay attention? By buying individual securities, we are per se using our judgment and saying that the ones we select are in some way more attractive than the others in the universe of possibilities. To make that decision, we need some sort of framework. Valuation is the framework that I recommend. Other frameworks include momentum investing, technical analysis, etc.
One theory of value investing is that in the long run , stocks achieve their fair value. The people who are participating on this thread, on the whole, believe that sometime this bubble will be deflated. Do any of us know when that will be? No.
But the idea of all of this is to do a little better, not to be perfect. It's not a game where one can get every timing right, every blip anticipated in advance. In baseball, you go to the hall of fame if you hit .300. In investing, you go to the hall of fame if you can consistently beat the market averages.
If your true answer is "what difference does it make what I think something is worth if the market doesn't agree with me?", then exactly what do you think this process is about? What is it that you think you are doing? If not creating a model of what is right and then placing your bets accordingly, what are you doing? (rhetorical)
Skeets is right, if you don't think you can outjudge the market, buy a mutual fund. |
