Five years have passed since the financial collapse of 2008 and ‘09. During that financial crisis, difficult lessons were learned by investors and investment advisors alike. One of the most important lessons is to 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. Even my young daughters understand this idea, but it remains a tough concept for many investors to implement.
In order to buy low, you must have cash on hand when an opportunity comes up. If the funds are not accessible when the cost is low, you cannot take advantage of the temporary price decrease to make a purchase. If cash is handy to buy at a bargain, 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. 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 a secure attitude to work from, often found in accomplished investors. It makes good sense – strong sense, to sell some investments at a profit while patiently anticipating low-buy opportunities.
In 2009, many investors sold their holdings from a position of weakness because they panicked; they wanted to spare themselves more pain. Had they sold their stocks earlier, they would have had 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, has increased by more than 180% from its low point in 2009. It has also been over 1,000 days since the market experienced a significant downturn, which may take place after long periods of growth. 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. OLV Investment Group is independent of Sigma Financial Corporation and SPC. Investment advisory services offered through SPC, a registered investment advisor. It is not possible to invest directly into an index. Past performance is no guarantee of future investment performance. This article is for informational purposes only and should not be construed as investment advice.