What Does it Mean to "Buy Low, Sell High"?

At a basic level, the phrase advises you to buy stocks when they are priced low and to sell them when they are priced high, thus earning you the largest amount of profit. Despite the false reassurance this common phrase may give you, there are some variables to consider when first investing in the stock market. At a given moment, it is very difficult to interpret why exactly a stock’s price could be low or high. A stock price may be low because a lot of investors are pulling out, and there is no guarantee that the price will ever go back up. Conversely, when a stock price is high, it could just remain there momentarily and come back down very quickly. Both of these factors are vital to consider and are there to remind you to momentarily halt your excitement when seeing “low” or “high” stock prices. 

 

In the stock market, there are times of fear and times of greed. Although this may sound like a constant rollercoaster with ups and downs, it is anything but that. During times of fear, most novice investors try to get rid of their stocks as soon as possible. This means it is the best time to take advantage and buy when the price is low. Conversely, during times of greed, everyone is trying to get their hands on even one share of a stock. This is the best time to sell because you can sell at a premium to those who really want it. 

 

Finally, it is important to never follow momentary trends in the market. During the Internet Bubble in the 1990s, people were sure that Internet stocks would never fall. Those who were knowledgeable sold their stocks, and when the internet market came crashing down, they were the ones who remained standing triumphantly. On the other hand, during the Market Crash of 2008, many people were worried that certain industries would never recover. Those who ignored the trend bought the stocks when they were priced low, and, once again, were the ones that ultimately remained successful. Smart investors are those who ignore trends and interpret market data at their very base level to make the best decisions.