When the market drops, some investors lose perspective that downtrends, and uptrends, are part of the investing cycle. When stock prices break lower, it's a good time to review the advantages of buy low, sell high.
Advantages of Buy Low, Sell High
Buy low…Sell high
Sure, you have heard of this right? But there is a strategy to it….
During a bear market, stock prices go down and investors tend to sell off shares as fear takes over. This is the time to buy at a discount if you have the capital and the knowledge to evaluate the best stocks to purchase.
As people become more confident in the markets, stock prices go up as the economy enters a new bull market. This is the best time to sell. As fear subsides, stock prices go up, increasing the value of the shares bought when the market was low.
While those strategies are clear when looking back, you must be able to control your emotions when implementing them.
Quick Tips on Taking Control of Your Emotions
When investing, you must take control of your emotions and stick to your financial plan. Stocks rise yes, but they also pullback (meaning fall) as well.
Be patient, have a solid investment strategy with a widely diversified portfolio, rebalance every 6-12 months to take advantage of market changes and save into your investments on a systematic basis (Dollar Cost Averaging).
The key is…don’t be greedy. Those who get too excited, end up buying into a stock at too high of a price. Don’t let your emotions convince you that the stock is going to go a lot higher than reality. When you become greedy and don’t take your profits, you’ll see them get swept up in the pull back and kick yourself for not selling when the price was up.
Buy Low, Sell High
January 25, 2022