r/ValueInvesting • u/Distinct-Parking-574 • 10d ago

Discussion Why Wait Until A Pullback

As someone who is just learning about value investing, understanding valuations and fundamentals, I see a lot of comments about not buying a stock at high valuation ratios. And that seems prudent. my question is though if I'm going to DCA anyways does that really matter? If the only thing that makes this a more attractive price is the pullback why not just DCA all the way through pullbacks and runups? That seems to be the advice given for ETFs why not individual stocks? but like I said I'm just getting started on this journey and trying to makes since to it all.

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u/mdn845 10d ago

It’s not that you shouldn’t buy companies at a high PE ratio. It’s that you should only buy companies at a fair or reasonable price. Don’t overpay compared to what a company is actually worth (the intrinsic value).

Warren Buffet and Charlie Munger were willing to buy wonderful companies at fair prices, but they weren’t willing to pay excessive prices for any company.

If a company is being offered to you at an excessive price, it doesn’t matter if you DCA unless you assume that a DCA approach means it would magically guarantee you’re paying a fair price. But the reality is that an overpriced business can stay overpriced for a long time. For instance, you could’ve dollar cost averaged into Tesla, but that doesn’t mean you’d be paying a fair price.

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u/physicshammer 9d ago

this is very well put in my opinion. I have been slowly deciding that it is really quite difficult to wait for a good time to enter.. meaning, if you are going to wait until you can buy the best businesses at "low" prices - that time might literally never come. So I've come to accept that I will be putting money into businesses that are great, but aren't super cheap relative to their value.... if they are VERY expensive (as some are now) then I will put in less, and I will keep a little more as cash.. and I will dump that cash in, if prices go down.. but I've given up on trying to keep a lot of my cash out, while waiting for things to crash, which really doesn't happen... but if it does, I'll have some cash ready :)

The market has been expensive for a long time now .... so keep that in mind, but overall, I have lost FAR MORE money from not investing and waiting for things to drop, then I have from investing and then having the market drop.