Monday, June 21, 2010

The Golden Rule... of Investing: Buy Low, Sell High

It sounds intuitive if you want to make money in the stock market, or anywhere else for that matter: buy low and sell high. The difference is your gain (or loss) on that investment. Even though it sounds intuitive, people often do not take advantage of the opportunity. The typical reaction to a slower economy is to sell stocks before the losses get any worse. This may be a good rule of thumb to avoid further losses if you are nearing retirement or are depending on that money in the near future, but what about long-term investors? This presents a great buying opportunity. The recent recession is obvious when looking at the Dow Jones Industrial Average over the past five years. Investing at the market low in March of 2009, would have resulted in some pretty hefty gains as of today. People often choose to stay away from riskier stock investments during a slow economy due to their volatility, but for the long-term investor, that can be the opportune moment to invest.

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