There are times I did not Buy Low (as in Buy Low, Sell High). And I did not regret it.
Let’s look at some of the major problem with the Buy Low, Sell High plan.
First, one must determine what is high and what is low. This is not always as easy at it looks. Of course, during a major market meltdown, low is often easy to determine. However, there are still two problem when buying during a market crash. First: will the stock go even lower? Second: should I wait and use funds for some perhaps other even-more-discounted stocks?
After one purchases stock, one needs to wait for a high point. This brings some similar problems. First: it is high enough? Will the price go higher? Second: if I sell, what will I do with the money? During a major market meltup, most things are at their highs, as we are trying to avoid buying high.
These descriptions of Buying Low and Selling High include waiting. One must wait for an obvious low, based on one’s criteria. And then one must wait for an obvious high, based on one’s criteria. These waitings can take a long time, often years.
In the mean time, we get itchy fingers…
And
When I mentioned that sometimes I do not buy at the low, I must admit I do not aim for buying at the high. I would prefer to buy low, just like everyone else. However, buying high, for me, is not a tragedy.
As previously mentioned, I am buying stock to add more dividends to my income. So the price, while important, is not the main driver. I would prefer to buy low because a low valuation means that the dividends I receive will buy more shares than if the price was high. That is obvious. But there is another reason.
Time
It is oft said that time in the market beats timing the market. So, on average, it is better to be invested than to sit on the sidelines, at least as far as dividends are concerned. With that in mind, having a few shares of some companies allows me to collect some dividends while prices are not necessarily low. As mentioned several times, most recently in When To Buy For Maximum Gains, owning dividend shares with dividend reinvestment set on allows the dividend investor to increase their holdings while prices decline as as well as in a subsequent recovery.
With this concept in mind, I recently added a few shares of several quality dividend players to my portfolio. When or if prices later decline, I can add to my holdings. However, for the duration, I will be collecting dividends and these dividends will increase my income and my share count.
What buying are you doing? You can let me know here.
The illustration is from Theatrum Chemicum Britannicum, compiled and edited by Elias Ashmole (1617–1692). This volume is considered the seminal volume of English alchemical literature. Courtesy The Francis A. Countway Library of Medicine at Harvard University.
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