If I were to ask you if you want to buy high and sell low, you’d laugh me out the virtual door. It’s the opposite that we want. Duh. Yeah, well, human psychology is a funny-but-not-to-be-laughed thing. It’s what keeps us from investing at the lows (I say lowS because no one knows when the low is in – only after the fact!) and it’s what makes us buy at those dizzying heights. Because everyone else is. It feels safe. And how could the crowd ever be wrong. Right?!
When stocks crash, this prompts retail investors to start selling. En masse. They do this because, let’s be real, losing money hurts and no one wants to check their portfolio and see that they’ve actually lost money. But all selling actually does is convert virtual losses – into real ones. Retail investors might also start selling because everyone else is. Back to the herd mentality. You feel less silly if everyone else is doing the same thing. Let me tell you this though: the only silly ones are those who click sell when their stocks (and overall portfolio!) have already collapsed in value.
You like a good sale? I bet you do! Who doesn’t?!
But think of it like this. Shoes you looooove and have had your eye on for way too long finally go on sale. Do you suddenly say nah. I don’t want them now. I’ll just wait till it goes back to full price! You’d have to be barking mad to do that! Or even think that!
So why is it that when stock prices start going up that we get all giddy and start buying as much as we can only to stare in silence when they go on sale. They suddenly become that rotten veg in your fridge everyone avoids like the plague.
Lemme tell you this, the best time to buy is NOT when everyone else is. It’s when no one (or almost no one) is. Buying a stock that has been feverishly oversold thanks to a wildfire of fear whose foundations are still rock solid is like getting a pair of Jimmy Choo’s for 50 bucks. A right steal. Unless you’re a guy you’d be mad not to take them. Though even a guy would be mad not to get them – for his girl!
Stocks aren’t shoes. Or are they?
We get excited when shoes go on sale but start crying when our stocks do. We don’t get excited by bear markets (aka a massive stock sale) and we don’t pounce on the sales. And this precisely what holds us – and our financial future – back. Wealth gets built during bear markets but only by those who are willing to buy when the rest of the world is busy flogging their stuff.
The thing is, bear markets come around every 3 or 4 years. Think of it like mid-season sales. You prepare for them (by saving!!) and you pounce on ‘em when the time comes. Yeah, course you could have bagged your shares 10% cheaper (or even more) but a bargain is a bargain. Yep, they can go to the clearance rack but sometimes they’ll get grabbed up before that. And that, I’m afraid, you just can’t time – or know.
“Be greedy when others are fearful and fearful when others are greedy”
You wanna know how to take full advantage of stock sales that come your way? It’s by living that phrase. Though I bet you’ve heard it spewed to you at some point or another. And the thing is, it’s so easy to say but 100x harder to do. Trust me. And this is because money isn’t just a string of numbers. For most of us anyway! It’s our past, present and future! We know our money is what can give us a better life. Yes, I know, money doesn’t = happiness but it can sure lighten your load and since a load of our problemos are money-related, solving money solves most of your problems Bingo!
Markets are forward-looking. Which means they’ll start to go up well before the actual economy does. If you wait to invest till things get better I guarantee that you’d be waiting a lifetime. Markets will rebound when things go from bad to slightly-less-so. Make sure you don’t await ‘cause killer sales don’t come around all that often. And that’s why recessions, bear markets and all the rest of it have often proved to be the best buying points since you’d have grabbed solid stuff on the cheap. All you need is a big fat dollop of patience and the tide will turn.
And guess what? Last week, the CPI figure came in at 7.7% which was lower than expected! Markets (and literally every investor) cheered! Why? Because they think the worst is behind us. That the Fed’s rate rising is actually working and the heat is slowly but surely escaping the economy.
Sure, markets could be wrong and inflation could very well go up next month but this goes to show how you really cannot time markets. And if you’re outa the markets you’ll miss these wonderful sunny days that don’t come around all that often. Case in point: the Nasdaq went up a little over 7.5%! In one trading day! You really don’t get these kinda mega-moves very often.
Think in decades when everyone else is too busy thinking about days
So when prices have gone below what represents their fundamentals, and investors seem to be getting more irrational by the day, don’t be afraid to step in. It’s a pretty difficult thing to do. To buy when everyone else is running for the door but your future self will thank you. And at the very least, please don’t sell your stocks on a sale! At least wait till they’ve gone back to ‘full price’. Whatever that means!
A handy-dandy thing is to stick to dollar-cost averaging. This money move is all about consistent buying. Topping up your investment account no matter the weather (or your mood!) because you can never really time markets.
Mistakes get made when we try to do that or when we get spooked (and trust me, there’s enough out there to spook anyone) so do yourselves a favour and try to think long-term. Zoom out but don’t get freaked out!
Disclaimer: This blog is not investment or financial advice. It is my opinion only. This blog is not a personal recommendation to buy/sell any security, or to adopt any such investment strategy. Always do your own research before you commit to any investment.
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