Buying High and Selling Low

Buying High and Selling Low

We all know we’re supposed to do the opposite and buy low and sell high. Why then do we all too often get it backwards? Actually that’s easy. To buy low you have to buy something that has not yet made it to the cover of the magazine or the front page of the newspaper. If it’s already made it there, it’s highly likely it’s already at the top. To buy low you have to buy something that most haven’t discovered yet. All too often that includes you. You have to buy when the news is gloom and doom. It takes tremendous courage to put your life savings in a volatile market when it’s crashing or before it has recovered. To buy low goes against instinct and reason for the common investor. As a result, very few buy low!

Why is it so easy to buy high? That’s easy, too. Buying high happens when the news is positive. The market is up and many are making money, probably including you. The temptation is to enjoy the ride a while longer or even buy more.

To do it right by buying low and selling high requires you to buy a lesser known stock or mutual fund, one that has never made headlines. You may also have to take a position in this investment when the news is bad and the market is low. The market is either still declining or not yet in much of a recovery.

Selling high means you are getting out of a particular position higher than you bought. The key here is that you are actually selling while you are still higher than you bought in at. People do funny things. They fall in love with their investments, unwilling to sell them. If you hold a position in the market long enough, it will always become a loser. There is no such thing as a permanently excellent company or a permanently excellent industry. Everything is cyclical. Greed also discourages us from selling while we are still winning. It feels so good to be making money on paper that we want to linger awhile longer, and then often we give back much, and sometimes all, of what we had made. Brokers often tell their clients not to worry since it was just paper gains, so now it is also just paper losses. This leads me to ask, “has the last decade been a paper decade?” This time around I want to make it count and realize my gains.

We know the people that get it right are called contrarian investors. Their decisions go against the flow. They swim upstream, seemingly all alone. That’s because most of the time they are.

A winning strategy is to sell, capturing the market’s gains on auto pilot. It would also buy on auto pilot. This effective strategy would take the emotion out of investing, allowing us to realize our gains without having to make difficult decisions. It would do one other thing for us also. It would capture the gain without triggering a taxable event until you decide to spend the money by pulling it out of the account.

Now that would be a winning strategy! I know of a strategy that does all this. Give me the opportunity to show you exactly how it works by answering all your questions. You should learn more so you too can benefit from just how effectively it solves the above problems.


Believing You Have to Take Risks to Make A Good Return

Believing You Have to Take Risks to Make A Good Return

Warren Buffet says that he doesn’t take risks. His moves are so thoroughly researched that he always buys at a deep discount, which protects him from a decline in the value of the company stock he has just bought.

Many investors who have gone back and done the math have concluded they would have done better if they had placed all their money in T-bills and just left it there.

The market is volatile enough that if you position yourself to fully benefit from the upside, the downside risk becomes so great that inevitably
the market will take back much, if not all, of the up and reduce your principal as well.

Warren Buffet says rule #1 is to not lose what you already have. Taking risk means you will have significant losses from time to time. The average Bear market lasts just 18 months but requires 5.2 years just to get even again. If you never experienced the loss, then you won’t be wasting 5 years just to break even again. A steady, positive return all the time will compete very favorably with at-risk positions that experience volatility on a regular basis.

Those that do well in the market spend extensive time researching opportunities before buying. They have an entry strategy, and just as important, they have an exit strategy. They also tend to do just the opposite of the masses and would seldom, if ever, find their buying opportunities listed on the cover or front page of any publication. If it’s in the paper, it’s in the price. In other words it’s already had its run up.

The key to successful investing is not managing risk; it’s avoiding it all together. When you become aware of any strategy that allows you to participate in the stock market without any market risk, fully protecting your principal and the newfound gains each year, you should seize the opportunity.

Today over $200 billion annually flow into these strategies, offering the account holders market opportunities without any of the risk inherent in the market.