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Buy High & Sell Low?

Seth Jentner08/27/2014

The market has been up recently. People are once again getting excited about stocks. Money is returning to stock investments.

Let’s pause for a moment to re-examine recent history and your own behavior.

Do you remember the bloodbath between October 2007 and March of 2009 when stock markets lost approximately 50% of their value? Investors may be forgetting the agonizing fear they felt during the financial crisis of 2008 and 2009. Those who forget the past are doomed to repeat it.

There are lessons we can learn from history. One lesson is: People do not learn from history. How accurate is your memory?

There is a well-known but little-loved investment philosophy employed by investors all the time. It is called the buy high and sell low investment philosophy.

Modern technologies place information before us moment by moment, day after day. All of this instantaneous information can cause would-be investors to fall prey to a short-term investment perspective. This can be dangerous.

Is there a way to avoid chasing returns (greed) or running from losses (fear)? Neither fear nor greed contributes to a sound investment philosophy.

If you are tempted to get back into the market now, I suggest that you should have been in four years ago. In my opinion, the only way to do this is to invest into a globally diversified investment portfolio with a broad variety of investment alternatives.

Avoid concentrating your investments into perceived safe havens or into the next “hot” investment. It can be dangerous. Avoid trying to time the market. That can be difficult to do successfully.

Rather, stay the course with a systematic, disciplined diversified investment strategy. It should help give you the confidence to ignore the short-term noise (whether positive or negative) and should  translate into a successful, long-term investment experience.

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