UBS: ‘Buy low, sell high’ is a fallacy – Finance


  • “Buy low, sell high” is a common mantra in stock markets.
  • But this is actually a “delusion,” says UBS Justin Waring.
  • If you wait for the market to dip before you buy, you can skip the major bull races.
  • It is much better to just buy stocks and keep them for a long time, he says.

“This time different” is not the most dangerous phrase in finance, “according to UBS“ Justin Waring ”. “This honor is to“ buy low, sell high. ”

Waring, an investment strategist for the Americas in the main investment management unit of UBS's “Wealth Management”, called the phrase “delusion” in a note sent to customers this week. It is not enough for people to analyze a phrase that is really applicable only to traders and does not give much support to long-term investors.

Saving bull markets means that investors who follow this advice may miss market profits, Warring said.

For example, imagine that an investor buys a failure in the S & P 500 and then sells when it reaches a new record high. As part of the buy low, sell high mantra, this investor usually has to wait for a 5% or 10% drop in the market to buy it back. But most often the market continues to publish new record highs after setting one record.

Waring uses data from the S & P 500, extending to 1960, to support its arguments.

"These approaches to market time" 2.5% pa ……………………………….. …….

“The main problem with waiting for the market to fall and selling at new record highs is that you have invested in the bulk of each bear market, but you miss most of the profits in the bull market.”

It is much better to simply buy stocks and hold them for a long time, Waring said, as the table below shows.

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