Buy Low, Sell High ! How ?



I hope stock market will crash tomorrow !!

Hey ! wait a minute (ちょっと待って) , don’t throw rotten eggs or curse at me !! J



Here is my story ….

Every stock market investor knows the old adage: Buy low, sell high. We often hear this in investment courses or seminars we had attended, even in financial blogsphere. We talked about “ Price is what you pay ,value is what you get “ , we wanted to buy cheap at best “bargain “ and high M.O.S ( margin of safety ).



But every day when we log into our PC or looking at the financial apps on our HP , we wanted to see the stocks we purchased (our portfolio ) in green and price continue to increase. We feel happy in seeing our portfolio in “positive “ territory . This is very much in contrary to what we want in “buy low “ , the real “low “ or value only appear in crisis or when market are having huge correction or pullback.

If you are a “ trader “ , Yes ! it make sense , you buy low (at current price level , based on what the chart said  , where your entry price may be in high side )  and hope to sell high (or higher high ) to make some money on the price differences . But remember that markets are interesting beasts and is utterly unpredictable one. It swing from one end to the other end like what greatest investment guru’s famous quote In the short run, the market is a voting machine but in the long run, it is a weighing machine.”

If you are in “ wealth accumulation “ stage and hope to buy at bargain , you should expect the market to crash tomorrow , the hardest the better , may be by another -30-50%. The real “value or great bargain will appear by then … I know and can understand that you might fear crashes, corrections and volatility if you need your money now where you may need to “cut loss” . 

The last thing somebody nearing or in retirement or ready to tap capital for an important expenditure wants to deal with are wild market gyrations and extended downside.


So how hah ?
we want to see market up or down ? It depends ….on your financial goals and stage of investment life cycle.



Further reading …

It's time to revisit the disaster scenario for stock prices from BusinessInsider.com

 

The Problem with Buy Low, Sell High Advice from Investopedia.com

 

“Buy Low , Sell High “ Sounds Easy. So Why is it Hard?


Quote “ A huge part of smart investing is psychological and this chart illustrates of one of the many psychological roadblocks we have as investors. We may want to buy low and sell high, but that goes against our instincts and biases. When a stock is falling, we dump it. When a stock is rising, we buy it. We sell a company when the price is falling because we are afraid of losing more money; we buy a stock when it is rising because we have a fear of missing out. To compound the problem, most investors are not experts at realizing when something high or low “enough. “ Unquote




We may end up ...



Cheers !!





Buy low and sell high , it’s pretty simple. The problem is knowing what’s low and what’s high. By Jim Roger


Comments

  1. Hard to time the market. I can only remain a certain percentage vested.

    ReplyDelete
    Replies
    1. Hi My Investment Machine,
      Yes, you are absolutely right..timing the market is near to impossible...we must always have our war-chest ready,,,take advantage on “fire sales “ during crisis..that’s where and when the real “value” emerges...
      Cheers ! :D

      Delete
  2. Hi STE,

    Always saying is easier than doing. Mostly, when GSS comes, the sell in fear of ‘losing their life savings’ than grab all the solid counters on discount!! Holding power is important too!! Hehe

    ReplyDelete
    Replies
    1. Hi sleepydevil,
      Yes, that's true, most ppl will act or react differently during financial crisis . Having holding power as well as not too stretch in " leverage " will be important , not to mention the " strong " mind-set and understand of the market characteristic & psychology.
      Cheers ! and Happy Investing.. :P

      Delete
    2. Not easy. In real life; even veteran retails with experience over market cycles were caught with more than 80% cash at Mar 2009 market low fearing Depression 2.0 and rather waited longer.

      Delete
    3. Hi Uncle CW8888,
      Yes, is really tough especially one is in need of $$$ or at / near retirement age, the psychological impact will be not be easy to "swallow"...
      Cheers !!

      Delete

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