We all know that in order to be successful investors, we should pay a low price and sell our investment for a higher price. So why do many of us do exactly the opposite?

Why do we sell low and buy high?

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  • From the book

    ...As investors, we should be looking for companies with high switching costs.

    As an example, let’s think about a decision that does not incur much switching cost. Think of the last time you went to the movie theatre. You were standing with your kids, looking at the list of movies playing. There were three kids’ movies. One of your children wanted to see Bikes 2, while the other two wanted to see a different movie.

    Two minutes of arguing and a boxful of popcorn later, you all decided to go to the other movie. The switching costs of making the decision of which movie to see were very low, and because of that, the company that produced Bikes 2 lost several clients.