Wednesday, January 23, 2008

Buy Low, Sell High

When stocks are low, buy. When stocks are high, sell.

Often people don't think rationally when it comes to their money. If the stock market starts to take a dive, people panic and sell. Even if it's at a loss, they will sell out of fear of losing more money.

You don't lose any money until you sell. If you have a long term buy and hold strategy then you have nothing to worry about. What you should do when the stock market falls, is buy more. The best time to buy is when everyone is selling out of fear. You can get good companies for great values because the stock price just followed the market. Once the market recovers, you will make out.

If the market is down because of an economic recession, you should buy. Again, the idea is buy and hold. Downturns and recessions are the best time to buy. The worst mistake people make when the market is down is to get out of the stock market. You want to get in while it's cheap so you can make the most return.

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