How does one buy low and sell high?

Question

I have heard this expression. Let's get down to the nitty gritty. How does one do this? Details please!

Answer 1

Buy on bad news (if it is a good company).

Sell on good news.

Answer 2

A cheaply priced stock or a "penny" stock can be more expensive than other stocks. Price alone is not what determines if the price of a stock is high or low.

You really have to dig deeper and look at the fundamentals of a company. For instance, if a Stock X is priced at $50, yet when you look at fundamentals and do a stock valuation, you realize that this stock is actually worth $85, then you have found an undervalued stock.

If say, Stock Z why cost $5.00 and after looking at it's fundamentals and doing a stock valuation, you find that it is actually worth $2.00 per stock, then Stock Z is over-valued and is an expensive stock; if bought, you would be buying Stock Z at a high price.

There are several factors you have to look at that determine the valuation of stock, the profitability of stock and most importantly, the financial stability and return on investment.

Answer 3

One way to do this automatically is to invest in different asset classes and re-balance each year. For instance, you could put half of your money in bonds and half in stocks. One or the other will do better, so that at the end of the year, you will have more money in stocks than in bonds or vice versa. Then you re-balance so you are once again half and half. This forces you to sell assets that have gone up (sell high) and buy the ones that haven't performed as well (buy low). Of course, you don't have to just have stocks and bonds -- you could split your portfolio into equal amounts among growth stocks, value stocks, foreign stocks, commodity-related investments, etc., and re-balance each year.

Answer 4

For a comprehensive discussion of how to buy stocks low, I recommend the following book:

"The Little Book That Beats the Market" by Joel Greenblatt.

Answer 5

Watch the charts for companies , Yahoo finance is great .
Most companies fluctuate and you can see cycles , usually over the course of a year or 2 .
Buy when you notice the company is at their low cycle then sell later when it gets up again .

Here actually is a 5 year chart for that stodgy IBM

http://finance.yahoo.com/q/bc?s=IBM&t=5y

And one for a smaller , more volitle company ENER

http://finance.yahoo.com/q/bc?t=5y&l=on&z=m&q=l&p=&a=&c=&s=ener

After a peak , wait for a drop , buy . . .
Unless the drop was due to news that the company was filing for bankruptcy !

Good Luck !

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Answer 6

Buy a house in foreclosure now.
Hold it and sell it when the economy picks up, Sell on the open market at a high price.