Six years have passed since the financial collapse of 2008 and 2009, and I feel it appropriate to re-visit some of the lessons learned during that crisis period. One of the most important lessons: operate your financial investments from a position of strength. A prime example of this strategy in action is the concept of buying low and selling high.
In order to buy low, you must have cash on hand when an opportunity presents itself. If the funds are not accessible when the price is low, you cannot take advantage of the temporary decrease to make a purchase. If cash is handy to buy at a bargain price, you can act from a position of strength. This sounds simple, but it’s not easy. For most investors, having cash ready to buy low typically means selling an investment when it is making a profit, or even selling something at a small loss in an attempt to avoid a bigger loss. It goes against the grain to sell assets when the profits are going up; but you must remember, most trees do not grow all the way to the sky. Selling high is an attitude to work from, found in variety of investors. It may make good sense – or possibly strong sense – to sell some investments at a profit while patiently anticipating “low buy” opportunities.
In 2009, investors could have sold their holdings from a position of weakness because of panic, wanting to spare themselves more pain. Had they sold their stocks earlier, they may have been in a position of strength to re-enter the market after the stocks decreased to their low point; not only avoiding the severe losses that result from selling low, but also setting themselves up for success in the future.
Recent research from Big Charts shows that the S&P 500, a trusted measurement of the stock market’s performance, increased roughly 180 percent from its low point in 2009. We previously wrote a similar article about selling at the highs, and the stock market is down roughly 14 percent – so far. Could now be the time to put yourself in a position of strength? Put some thought into it and consult with your financial advisor.
Securities offered through Sigma Financial Corporation, member FINRA/SIPC.
Investment advisory services offered through SPC, a registered investment advisor.
OLV Investment Group is independent of Sigma Financial Corporation and SPC.