10 Investment Guidelines: Part 1

4. Bull markets are made of risk aversion and undervalued assets. They are not made of cheering and a rush to buy.

The advice here is to buy cheap and sell rich. Whether at the top or at the bottom of markets, investors exhibit emotionally irrational behavior. Pervasive selling stems from investors acting on emotion to avoid risk. This creates value, from which bull markets are born. An emotional rush to buy that is often accompanied by cheerleading will result in valuations being stretched and elevation of risk levels. This occurs as the "marginal morons" enter markets. Tops in market are formed from cheering and a rush to buy.