Buy Low, Sell High – And most people do reverse

No matter what business you are in or what profession you are in, the way to make money is to get it for less and sell it for more. It all boils down to the time attested proverb, 'Buy Low, Sell High’. It appears so simple, logical and obvious, yet a majority of retail investors do not follow this strategy!

Let's break it done and approach it systematically, when do you think there is an opportunity to Buy Low? Obviously, during tough and challenging times the prices will be low. Times when stocks have been battered, portfolios are in losses, pessimism is in the air, people are complaining about losses and there are no hopes of any good news coming it. BINGO! This is the time to BUY! You cannot get them any cheaper.

On the other hand, when is the best time to Sell High? Is it when markets have become your best friend, everybody is gung-ho about it, all looks good and rosy, markets are expected to continue to rise, there is no hint of any bad news. Yes, although it feels untrue, it surely is the time to SELL!

Unfortunately, according to all statistics, most of the buying and selling by retail investors happen contrary to this. The usual fear psychology forces investors to stay away from equities owing to the gloominess and pessimism built around volatile markets. While investor eagerly jump-in when the markets are skyrocketing and are already overbought. For example, an investor will not buy RIL at Rs. 1,000 in a down market but will rush to buy the same stock when it touches Rs. 1,300 in a up market. Is this ‘Buy Low, Sell High’ strategy? No, hence, the losses are obvious.

At DSIJ, we have noticed that in volatile times, interest in the market is subdued and we receive lesser queries about stocks or market while when the market is booming we have peak sales. This is inspite of continuously informing and educating investors about the risks they are getting into at high levels.

Nonetheless, as a well-wisher and advisor of investors for past 34 years, we will continue to build awareness around this strategy. Retail investors who follow this strategy and act accordingly have seen and will continue to see their fortunes rise. Investors who have got the essence of this article will surely benefit in the future by investing now. We identify the current battered levels of 2018 as a good opportunity to ‘Buy Low’.