As in real life: Why there is little point in extreme bargain hunting

The propensity to hunt for bargains appears to be a general human phenomenon. However, painful experience shows that bargains do not always deliver what they promise. Too often, supposedly good buys turn out to be the result of bad decisions because not only the price, but also the quality was low. So, from a long-term perspective, cheap purchases may then often become quite expensive. But does this experience also apply to the stock market? Well, the stock market is full of bargain hunters looking for low-priced entry opportunities. Even today, for example, all followers of the value investment style are ultimately – to quote the father of value investing, Benjamin Graham – always looking for companies that are worth a dollar but only cost 50 cents.

However, while this approach had quite some appeal in a period of still inefficient markets (the quote is from the 1930s), the question must be allowed whether this working hypothesis is still justified today.