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'Be fearful when others are greedy and greedy when others are fearful' says Warren Buffett. 'Buy low and sell high' is supposed to be the classic and simple formula for beating the stock market. Well, if it is indeed as easy as it sounds, the intriguing question is - why don’t we see many people actually do it on a consistent basis?

Well, the fact is that when it comes to practically implementing this easy sounding homily, things can get pretty tricky. This was a problem that was well understood by the erudite value investing proponent Benjamin Graham. His explanation of what makes such a policy difficult to follow has tons of insight in store for the ardent student.

Two obvious problems immediately come to mind. For one, it is extremely difficult to have the independence of mind and the confidence in your thinking to act opposite to what everyone is saying and doing. Stocks do not sell low when everything is hunky dory and everyone is expecting good times to come. They sell low when everyone is frantically selling and forecasting further steep falls in the stockmarket along with a further deterioration in the economy. To be putting your hard earned money into the stockmarket at such a time requires immense fortitude to say the least.

The second big factor is patience. Stocks in general do not sell at good enough prices very often. Such opportunities are quite often spaced far apart, and for the long period in between, when bull runs lead markets higher and higher, making record highs each time, it demands a lot of patience and discipline to wait for opportunities that may be spaced years apart.

But as Graham noted, there are still other factors that make it even more difficult for an investor to follow this rule consistently over many years. When it comes to actually buying and selling, deciding the appropriate levels at which to buy and at which to sell can be most perplexing. You could have easily stocked up when the Sensex fell from 21,000 to 16,000 last year, only to see it fall another 50% in a matter of few months. Similar examples can be given on the way up when overheated markets have gone from stretched, to more stretched, and then even further to insane valuations. It can be quite disturbing to sell at a certain level and then see markets go substantially up from there, with every second person you meet making a big buck in a short time.

Additionally, and perhaps more importantly, the underlying value of a company itself might change from cycle to cycle. A company that might look extremely cheap at a particular time could witness such a change in its business that the low price at which you bought can easily start looking expensive after the change. Again, the reverse of that may also happen, wherein a company that may look very expensive may so change in its quality and level of business that the initial high price may later look like it was more than justified. But it may be noted that this applies mostly to individual companies and seldom to the market as a whole.

In conclusion, these are some of the problems that an investor has to deal with when trying to 'buy low and sell high'. There are no easy answers to each of these problems, and becoming good at dealing with them requires a lot of study, experience and determination. But that said, it is also true that just being aware of each of them is the first step in that direction.

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