I read a quote that stuck with me:
What the wise man does in the beginning, the fool does in the end.
– Warren Buffett
If you find an asset that’s underpriced and buy it, eventually others will realize it’s underpriced and buy it. As others buy it, the price goes up until it’s no longer underpriced. As the price continues to rise and the asset becomes overpriced, it draws more attention and people buy based on momentum. Eventually, the asset becomes so overpriced that the price begins to decline, causing a loss for those who bought at peak price because of momentum.
The wise man spurns consensus and goes against the grain, potentially realizing an outsize return. The fool values consensus and follows the crowd, potentially incurring a loss. Consistently successful investors are comfortable acting on their high-conviction, nonconsensual views.