Don't confuse fair value with historical prices

Disclaimer: Please note that all content and information in this blog are for educational and informational purposes only and should not be taken as professional investment advice.

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A common mistake many investors make (including myself), is mixing between fair value and historical prices.

Before buying an asset, we tend to look at its historical prices.

There's nothing wrong with that, except we tend to confuse fair value with historical prices.

Just because an asset was historically X does not mean it's fair value is X today.

High quality assets will see their fair value rise steadily over time.

So to buy quality assets with reference to their historical prices will cause you to not buy at all as the historical prices of quality assets will keep rising.

To decide if it's a good buy (or sell), you must compare the current price with its fair value, not historical price. 

Technical analysis focuses on historical prices. Fundamental analysis focuses on fair value.

To evaluate all buy/sell decisions based purely on technical analysis is not investing but trading.

To invest well, we need to evaluate our decisions based on both fundamental and technical analysis, which means considering both fair value and historical prices.

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Disclaimer:
The content and information provided on this blog is solely for educational and informational purposes, and should not be construed as financial advice. The accuracy or completeness of the content and information provided in the blog cannot be guaranteed. Before making any investment decisions, it is important for readers to research and carry out independent verification of the information provided, or consult with a qualified financial professional. No warranty and no liability whatsoever is accepted for any loss arising whether directly or indirectly as a result of actions taken based on the ideas or information found in this blog.

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