Banking Blog

Busting Investing Myths Series

1) Buy Low and Sell High

This is the mantra that was taught and still being taught as a one line guide to stock market. It sounds simple, it’s sounds like a better deal and even sounds like a no brainer.

But it is super difficult or outright impossible to be right over a long term. A good Stock’s price go up and down but gradually goes up over long term.

Say you buy a stock for $200 and it goes up to to $300, you think it’s a good profit, sell it and got yourself a profit of $100. But the price keeps raising and hits $400. Now you think it’s better to wait until it’s price comes down but instead it rises some more and reaches $500. Now you will get into fear of missing out , think it can go further up, so you buy it at $500. Now it falls down to $400, You will think you will wait until it goes back up , but it goes further down and reaches $200, You will get into panic mode and sell it at $200.

Net profit : - $200 ($300 loss and $100 profit)

It’s easy to believe that you can Buy low and sell high, but you will never know what price is the lowest to buy and what price is the highest to sell.

Everyone is wise in a bull market and everyone is a fool in a bear market.

Better way to invest in stock market is to invest a fixed amount every paycheck or month called

SIP - Systematic Investment Plan

Read about all 7 Investing myths