Buying High and Selling Low

Sep 2010 //
Optimism/Pessimism
Investing

If investors had a good sense of when the stock market would rise or fall, it makes sense that they would buy low and sell high.  However, economic history tells us that investors more typically buy high (when they are feeling optimistic) and sell low (when they feel pessimistic).  It should be obvious, therefore, that investors generally do not know what stock prices will do in the coming weeks or months.  Indeed, what stock prices do over the short term is more typically the opposite of what investors expect.  We hope investors will think about that the next time some TV guru suggests they sell their stocks and buy gold.