Thinking Differently About "Buy Low, Sell High"

We’ve been reading this weekend’s New York Times mutual funds report sitting on our kitchen table a little bit at a time for breakfast and something we saw in, “Don’t Pay Tax Twice On Your Fund Gains” changed how we thought about the old adage of “Buy Low, Sell High.”

The article quotes Duncan Richardson, chief equity investment officer of the Eaton Vance financial service company as saying,

    “I’ve never seen a great investment that you won’t have another opportunity” to buy back at a lower price, after the requisite 30-day period.”

And recently we also read someone talking about how selling after rises is good because it “locks in gains.”

Now, the following is probably going to be obvious to some of you, but hey, if we didn’t know it, maybe some other investment novices will benefit too. Before, we had sorta thought about buy-low-sell-high as like you want to get in on the ground floor of a stock, sell it after it gets to the top, and then you’re out and onto the next one.

But really, Richardson is saying you can buy low, sell high, then buy low again, if the investment is good and your timeline is long, sell high again, and perhaps again and again.

Then again, we barely have any idea what we’re talking about here, so please correct us if either we or are misinformed.

Of course, you don’t want to do this too much because the transaction costs will eat into potential profits, and you can drive yourself crazy with “over-steering.” We’re still believers in a buy-and-hold strategy, but the revised buy-low-sell-high concept is something we’ll be keeping in consideration.

Don’t Pay Tax Twice on Your Fund Gains [New York Times]