Buy low and sell high is the ultimate guide to successful stock investing. It is also the reverse of what many investors do.
It’s not that investors start out to do that, but too often, they use
price, and in particular price movement, as their only signal to buy or
sell.
Stocks that have gone up recently, especially those with a lot of press,
often attract even more buyers. This obviously drives the price up even
higher.
People get excited about what they read and see and want a part of the
action. They jump into a stock that is already trading at a premium –
they buy high.
Traders
Experienced traders can make money jumping in and out of a stock that’s caught the public’s attention, but it’s not a game for the inexperienced and it’s not investing.
There’s risk involved and tax consequences along with other issues that
mean most investors should leave this activity to short-term traders.
For most investors, trying to grab a piece of the latest flashy stock, usually means paying too much (buying high).
Bad Decision
The other side of the market is when a stock has fallen; most investors may want to sell along with the rest of the market. If you go by price alone, this can be a bad decision (sell low).
There are many reasons a stock’s price drops and some of them have
nothing to do with the soundness of the investment. That’s why if you
only follow price you may miss an opportunity.
After a stock’s price has fallen can be a great time to buy (buy low) if you have done your research on the company.
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