As this chart shows, people DO continue to make the same mistakes over and over again. It shows that stocks with high P/E ratios, generally in exciting new industries, are bad investments (in other words, they're overpriced). Yet people continue to bid these stocks up to astronomical prices, decade after decade, with some sort of new justification why this time is different.
The best stocks are the boring, undervalued stocks. Tobacco, processed foods, paper, etc.
Because the specific areas in which people are irrational are pretty predictable. Once you know the types of irrational behavior that people are inclined to engage in, it becomes easier to understand it and prevent it.Originally Posted by phattonez