I want to share with you a very powerful concept which I only learned recently. This is in relation to building your wealth. What is wealth aside from the dictionary definition? I define it as the storage of current purchasing power for future use. Similar to batteries that store electricity for future use and lose their power over time, wealth loses its power due to inflation and many other factors.
What does this have anything to do with “buy low, buy slow?” As you build your wealth, it is important to consider all the factors affecting the storage mechanism. For most people wealth is stored in terms of currency (such as bank account with dollars) or a house. Unfortunately, for some people wealth is negative because of debts. I hope you do not find yourself in this situation.
For the elite fortunate enough to have abundant current purchasing power, wealth is stored in a diversified form of different assets such as gold, money, stocks, bonds, land, commodities, contracts, obligations, new ventures, patents and so on. The smart ones know that they must diversify but they don’t just diversify overnight. Instead they accumulate assets slowly. They know when is a good time to begin accumulating an asset but they are not arrogant. They do not just go out and buy gold because gold has lost 20% of its value, for example. When you see a good deal such as an asset that you have been trying to diversify into which has lost a lot of its value, consider buying some carefully — for example 5% of your intended holding. Then wait and see what happens. Do not be arrogant to buy 100% of your intention because the asset could lose its value further. The key is to buy a bit more as it loses its value. If it appreciates instead, then you’re in good shape.
I believe you will improve your returns much more with this strategy than trying to guess and gamble where the next dip or downturn might be. Your wealth preservation machine will operate better with this small yet powerful adjustment.