global
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| Buy low, sell high! |
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So I've heard this a lot: Buy low, sell high! Isn't this advice kind of vague and stupid?
I mean how are you suppose to know if something is low or high? Highness and lowness are relative terms. The only way you can know if something is at a low or high point is to see how it performs in the future and compare it with itself in the past. Since no one can do this the advice is pretty much pointless. Am I wrong?
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Wed Feb 10, 2016 1:15 am |
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oldguy
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I read a report on a 23-yr brokerage study, the clients who incrementally accumulated got about a 12% yr return for that period - the clients who moved out of stocks during dips and bought back in after the market recovered received an average return of 2.3%/yr (during that same 12%/yr 23-year era.) It seems that our intuition and our 'common sense' simply does not work. Think about what people say - "the market is down, I gotta sell" - and a couple yrs later they say "the market has now recovered so I'm gonna get back in". It sounds logical at the time - but it is "buy high, sell low" at its worst!
quote:
how are you suppose to know if something is low or high?
That can only be seen in the rear view mirror. You cannot know if today's market is in a down trend - or if tomorrow is the beginning of an upturn?
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Wed Feb 10, 2016 2:23 am |
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mathjak107
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actually no mantra has lost more money for people then buy low sell high .
we all thought low in 2008-2009 was when the markets fell 2000 points . little did we know it had 4000 more to go .
folks bailed out and stop losses were hit and money was lost .. in the end you are trying to catch a falling knife .
buy high , sell higher has made more money for folks then any other . the trend is your friend and the odds of being last one on libe before you lose money is slim
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Tue Jul 19, 2016 6:57 pm |
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littleroc02us
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quote:
Originally posted by mathjak107
actually no mantra has lost more money for people then buy low sell high .
we all thought low in 2008-2009 was when the markets fell 2000 points . little did we know it had 4000 more to go .
folks bailed out and stop losses were hit and money was lost .. in the end you are trying to catch a falling knife .
Actually your wrong, because as you stated those people bailed out and sold, should they have stayed in for the long term like most knowledgable investors do, they would have seen over 100% returns. In late 2007 the Dow was hovering around 12,000 and in early 2008 it had crashed to 8,000. If someone for example had bought in December 2007 and held onto their their vanguard index funds and rode out the poor market, the Dow in 2016 now sits above 18,000. See Long term investing in Index Funds using dollar cost averaging is the way to grow wealth, not timing the market. So whether or not the market is high or low really doesn't matter.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Wed Jul 20, 2016 3:44 pm |
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mathjak107
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actually i am right . bad investor behavior is still part of the deal . . you can't rule out the fact that humans hate losing money more then they like making it .
morningstar's investor returns show that bad investor behavior out weighs good investor behavior in almost every case as the funds themselves do better then investors get .
that shows that as a group they are doing the wrong thing at the wrong time .
it does not change much either going to less aggressive balanced funds .
most investors as a group get burned trying to buy low . the worse the drop the worse the small investor returns are .compared to the fund itself .
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Wed Jul 20, 2016 3:51 pm |
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littleroc02us
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If your speaking of behavior, then yes most people buy high, because they are uneducated and are trying to time the market. When the market starts crashing these same people get scared and sell low. But that isn't how you stated your reply, you said that buying low and selling high loses people money. That isn't mathematically correct. If someone buys into the VTSMX fund at $27.00 a share and sells at $35.00, then they've made money.
The simple fact is no one should try to time the market. There have been studies done that only 15% of fund investors have beaten the S&P 500 and it's never the same 15%. So what that tells us is that it's best to invest longterm in the S&P 500 and to stop trying to time the market.
Risk comes from not knowing what you're doing. (Warren Buffet)
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Wed Jul 20, 2016 4:04 pm |
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mathjak107
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i agree 100% with you . investing is a long term deal . but that is not what most investors end up doing . the bail out when they get scared or they try to buy at what they think is low , get scared again and reverse that thought .
i have been an investor for almost 30 years through all kinds of downturns . i buy as part of the plan whether high or low .
since markets are up generally 2/3's of the time and down only 1/3 most of my money is made buying high and selling higher .
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Wed Jul 20, 2016 4:07 pm |
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