Stock Market - The Five Myths_3
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STOCK MARKET - THE FIVE MITHS_3
MYTH 3 : BUY STOCKS ON THE WAY DOWN AND SELL ON THE WAY UP.
There's an old adage that says the way to make money in the stock market is to buy low and sell high. That, of course, is an irrefutable truth. The only problem is that many investors confuse this nit of conventional wisdom with the assumption that if stock is going down in price it is low, and it is going up in price it is high. Consequently, they buy stocks on the way down and sell on the way up. There's hardly a worse thing an investor could do.
Stocks are bought on the expectation that they will go up in price. If a stock is going up in price, it is fulfilling that expectation. When the price is going down, it is denying that expectation. Therefore, it is logical to buy a stock when its price is going up.
Moreover, one of the best times to buy a stock is when the price has broken above an old high. At this point there are no unhappy holders who are waiting to dump the stock. If the stock is fairly valued, there should be cleared sailed ahead.
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