This article expresses some of my notions on investing–especially in relation to the “buy low, sell high” mantra.
MarketWatch.com reported in “Opinion: Almost no one believes the stock market will fall” that,
“Everyone believes the U.S. stock market has reached a permanently high plateau. . . . A recent Investors Intelligence survey showed bearish sentiment is at its lowest since 1987 (13.3%). . . . short-sellers have nearly disappeared along with the few remaining bears. . . . the VIX (“fear index”) is at historic lows (near 12), which reflects investor complacency.
“Put another way, almost no one believes this market will go down.”
As I’ve repeatedly observed, the fundamental strategy for profiting from any investment is “buy low and sell high”. You buy an investment for $100 (when its price is low); you later sell it for $200 (when its price is high); you make a $100 profit.
Conversely, if you buy an investment for $100 (when you mistakenly believe its price is low) and later sell it for $50 (when the price is even lower), you’ll lose $50.
The theory behind the “buy low and sell high” investment strategy is obvious and simple.
In practice, however, “buy low and sell high” is complicated and hard to apply because it compels investors to:
1) it diligently and independently research the current and historical price of whatever stock they’re attracted to; and
2) act contrary to the “conventional wisdom” of mass of investors precisely whenever that “wisdom” seems strongest.