Making money can be very simple. Most folks over complicate the process or think that making money is overly complex. Of course, it can be – but doesn’t need to be, at least not 100% of the time. Understanding the buying and selling investment cycle with a focus on “selling high” may have potential benefits for every investor.
Market volatility can be a good thing
So far this year the market has been noticeably volatile—which can be a wonderful thing, depending on the outlook! Market “dips” can allow investors to buy low, with subsequent rebounds in the market providing opportunities to sell high.
Should I buy low or sell high?
You’ve probably heard the saying before, I’m sure: “buy low and sell high.” But does “buy low” always need to come first, especially in an established portfolio?
Some investors find that it’s better to “sell high” first, then worry about buying low later.
Both parts of the cycle are important, but some investors — whether they are invested in stocks, gold, bonds, real estate, or otherwise – look actively for opportunities to sell high.
What it means to buy low
Determining when the market is “low” can be tricky, and requires education and patience… but it’s very difficult to buy for an investor with no cash in hand in the first place!
Given that an investor does have funds to work with, that investor will have to wait for the market(s) to rise over time. This may mean weeks, months, or even years before that investment can be sold high.
Benefits of selling high
Determining at which point the market is “high” requires education and patience as well. However, this focus can be thought of as a positive one – it’s exciting to sell an investment at a peak and possibly realize a gain.
At this point, investors may also have additional cash in hand—the proceeds from the sale. This can mean that the market going down becomes a benefit of sorts; it’s an opportunity to potentially make a smart buy that could pay off in the long run, with readily available funds.
Don’t forget both parts of the investment cycle
The truth is, many investors never sell high. The problem with this strategy can be that investments will eventually go down within the normal market cycles, but also that the investor may have a shortage of cash in hand. This means that opportunities for smart buys when the market is low may be missed.
With proper preparation and planning, selling high can be a sound part of an overall financial strategy to take advantage of both high and low points in the markets.
This column is sponsored by Allen & Company.