Just a few days after my previous appearance on Bloomberg Television, where I re-affirmed that the best time to buy is when shares are at an all time low and not all time highs, a similar view has been expressed by the richest man in the World: Warren Buffett. In his New York Times Article he just reaffirmed the concept of buying into US companies when the valuations are very low.

In Investing we tend to buy when a company or a mutual fund returned great profits over the last year. There is no evidence that buying, as an example, a mutual fund that returned 20% per year in the last five years will lead to similar results. Yet we tend to buy overvalued shares and follow the trend. If it went up 20% it must be a good investment. If it went down 40% (as it is well the case this year) it is too risky. The opposite is true: now the valuation might be lower than the intrinsic value or in any case more balanced. Yet many investors insist in buying high and, unfortunately, selling under panic and fear low.

Investing is quite a peculiar sector. In normal circumstances we would never buy a car at twice the market price/real value. Yet in investing we end up doing the same mistakes.

So how do you enter the financial markets ? If you do not have the time to follow your investments the best way to enter is probably through an index fund (ETF - Exchange Traded Fund) or a good mutual fund. Finding a good mutual fund is very tricky as many managers are more concerned about making more profit for themselves than for the fund. Many managers are more concerned about the asset under management (the bigger it is, the higher the profit) than performance and preserving shareholder value. This subject deserves a second and more in depth look and I might discuss this more in the November Dean's letter.

With an ETF you simply buy the index and your costs tend to be much lower. Indeed some mutual funds did better than the index but only 20% or less are consistently doing better than the market.

Whichever you chose (ETF or Mutual Fund) having some money, if you can, invested in the stock market will almost certainly pay off over the long run. Don't take my word for granted but the one of Warren Buffett !