Buy Low, Sell High: How This Basic Strategy Can Be Very Counter-Intuitive

When investing, you buy low and sell high; it seems simple, right? Yet this most basic of investing strategies is actually quite counter-intuitive.

If you take a look at the chart to the right, you’ll see a very typical psychological cycle that investors experience.

When everyone is making money, you want to buy and get in on the upside. When the markets are tanking, you want to sell and avoid future losses. As Warren Buffet once stated: “Be fearful when others are greedy, and greedy when others are fearful.”

There is always an unavoidable element of market timing in investing, but intentionally exiting and entering the market to attempt short term market timing can create unnecessary risk.

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Quote of the Month

“Do I not destroy my enemies when I make them my friends?”
– Abraham Lincoln