Buy Low Sell High - Investment Advice That Works?

“Be Fearful when others are greedy and be greedy when others are fearful” -Warren Buffett

This famous quote by Warren Buffett sums up the buy low sell high strategy. Buy stocks when the market is down, and sell them when the market is up. 

A simple quote never tells the full story though. Here are the limitations of the buy low sell high strategy

One of the number one rules of investing  is that you never ever want to try to time the market. The buy low sell high strategy forces you to do just that.

Timing the Market

The buy low sell high strategy does not take anyone’s investment timeframe into account. Should you sell stocks in your retirement account when you are thirty years old because the market is high? Probably not.

Investment Timeframe

Sometimes there’s a reason why certain companies are low. If you had used this advice to buy Circuit City right before they went under, you’d have lost your entire investment. Not all individual stocks that go low will go back up

Insolvent Companies

If you’re someone who can’t stomach lows, you probably won’t want to invest in the stock market when it’s bottoming out.

Risk Tolerance

Try dollar-cost averaging.  Set a certain amount of money aside to buy shares every month  without paying any attention to market volatility.

What Should I Do Instead?