Investment Strategy – Buy High Sell Low

[RickRodgers]

Reading this headline you must have thought the writer has lost his mind. I haven’t lost my mind but the majority of investors may have lost theirs. They don’t consciously adopt this strategy but ultimately adopt it by letting fear control their investment decisions.

The stock market fell about 2% in July (S&P 500 Index) and investors pulled $31.61 billion out of stock mutual funds according to the Investment Company Institute. The stock market was down about 5% in August. The figures for stock fund sales aren’t available yet but are estimated to top $54 billion. This is buying high and selling low and it’s not the first time. Investors pulled billions out of stocks as the market declined from the Lehman Brothers bankruptcy in September 2008 through the market low in March of 2009. Then they held their money in cash while the market rallied over 80% the next two years.

The fear of loss causes many people to make bad investment decisions. Christians shouldn’t be susceptible to this mistake. Our wealth is not contained in our stock portfolios. Mathew 6:19-21 reminds us “Do not store up for yourselves treasures on earth, where moths and vermin destroy, and where thieves break in and steal. But store up for yourselves treasures in heaven, where moths and vermin do not destroy, and where thieves do not break in and steal. For where your treasure is, there your heart will be also.”

A successful investment strategy takes advantage of down markets by using the opportunity to rebalance. A strategy that allocates 60% of your money into stocks and 40% into bonds will be overweighted in bonds when the market is down. Rebalancing forces you to sell bonds and buy stocks to maintain your allocation. When the market is going up the opposite happens. This forces you to sell stocks to buy bonds to rebalance. The simple act of rebalancing forces you to buy low and sell high – which is a much better investment strategy!


Rick Rodgers - Christian Financial Expert and Keynote Speaker

http://rodgers-associates.com

http://rodgersspeaks.com/

[makingchristian]

He buys low and holds on for the long haul... good or bad. He doesn't trade a lot, and he doesn't sell off when the market goes down. Instead, he buys when the market drops. The other week when Bank of America came out with some bad news, he invested money and made over $500 million in one day! Unbelievable. Thanks for your article. Good reminder to not sell off after everything has dropped and re-invest once things have gone back to the top!