RE:A Question Asked ...... Opinion Given Here is something to consider for the long term investor. Whether or not we pay $16 today or $20 next will only slighltly increase our compounded annual returns but the difference is hardly enough to brag about.
If in 4 years time we are trading at $100, then our geometric annual compound return would be 58.16% if we use today's close. If next month we buy it at $20, then we get a geometric annual return of 50.82% or an improvement of 7.34% even though the 1 month return is ~ 25.1% !
Most short term technical traders have no clue about this and they pay too much attention on what they pay for the securities today. The intelligent investor wants to maximize his geometric annual return and he doesn't care as much about the price paid today. He wants to see a durable competitive advantage and a fair price but he doesn't concern himself in finding the lowest entry point possible. Real estate is a perfect example of this. The price one pays for a house today will hardly matter when he doubles or even triples his home value in 10 years. As long as the economics for your investments are in your favour then you should be alright.