Topic: How To Invest

What is Pat’s commentary for the week of January 27, 2015

Article Excerpt

John Templeton, a 20th century investing master, once said, “The four most dangerous words for an investor are “This time it’s different”. What he meant was that the market goes through recurring cycles of optimism and pessimism, and that prices rise and fall in response. It’s dangerous to let yourself get caught up in a tide of optimism or pessimism and take it to mean the world has changed. One great example is the Internet boom of the 1990s and early 2000s. Many Internet stocks rose to extraordinary heights in those days, based on the number of visits to their websites, rather than dollars in their bank accounts. Back then, lots of analysts and investors believed that “This time it’s different” and that these stocks could go on rising indefinitely. Instead, the Internet stock boom ended suddenly, like most speculative booms. Most of the top Internet stocks collapsed and brought huge losses to investors. That’s the kind of risk Templeton had in…