Simple rule for investing (maintain a strong foundation of a pyramid).

We know of the old adage, "Buy low, sell high." How many investors can be disciplined to put this principle into practice? No wonder only approximately 5% of all stock market participants make the cut and get their deserved returns from the 95% who fail to do so.

How do one buy into the market? When prices are low during bear markets, buy aggressively so as to build a good foundation of shares of selected potentially good companies at cheap valuations. As stock prices increase, buy lesser amount of shares each time as the price heads higher. With each rise in stock price level, the amount of shares purchased must be lesser and lesser. This culminates into an analogy of a pyramid with more shares bought at lower prices and lesser and even much lesser shares bought as prices head higher and higher.

This simple idea of a pyramid buying process is not unknown to many but yet "seems to be unknown" to many. This is because we still hear of many market participants making losses on their investments lamenting the fact that they got caught at high stock prices. To be able to generate returns, one needs to be abnormal compared to the rest of the many market participants. When prices are heading higher and higher, a normal investor will buy more aggressively thinking of only better days ahead. This makes him practise an "inverted pyramid" way of buying when the head is heavy and the base is not able to support the head since more shares were bought at high prices instead of lower prices. With a weak foundation through "inverted pyramid" way of buying, it is no wonder when prices start to head back to lower grounds, the poor investor is left hanging with many shares bought at higher prices, and the probability of capital loss is high.

More shares bought at lower prices and progressively lesser shares bought at higher prices creates a strong pyramid foundation where base supports the head

So, the more abnormal an investor is, refusing to be caught up with greed which is normal to the common crowd who chase after higher stock prices, the higher the chances to avoid risk of capital loss and higher the chances to make returns on investments. Thus, investing is mechanical and boring and made simple with the idea of a pyramid way of buying stocks. Don't be typically normal in investing. Consider being abnormal instead.