You've heard the saying, the best way to invest is to "buy low and sell high".
It makes sense right? If the market goes up and down all the time then buying when it's low and selling when it's high should make you some money, right?
Well, not quite. Here's why this phrase could be easily misunderstood:
- Timing. It assumes you know when a stock has hit rock bottom and when it has peaked. No one knows this. It's quite possible for a share price that has dropped dramatically to keep going lower.
- Price focus. It makes you focus more on what the share price is doing rather than what the underlying business is doing. That's why Warren Buffett says he evaluates stocks as part ownership in an actual business and not as ticker symbols.
- Short term focus. It distracts you from your longer term goals. In the short term, anything is possible in the markets. That is something most people forget particularly given that we've had relatively low volatility over the last year or so.
With that in mind, here are some stocks that have gone low recently that I wouldn't buy:
Instead of buy low and sell high, one alternative strategy is to look for the disruptors. Today's growth stocks could well be tomorrow's blue chips. In our report below, we outline 3 revolutionary companies that fill the bill.
