Does Buy Low Sell High Really Work?
“Be Fearful when others are greedy and be greedy when others are fearful”
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.
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.
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.
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?
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