Thursday, March 12, 2020

The Ultimate Guide to When to Buy and Sell Stocks

We’ve all heard that we should buy low and sell high. But when are stocks low and about the rise, and when are they high and about to fall? Here we reveal the secrets to when to buy and sell.

We begin with the short answer and then explain more fully.

When to buy. When you have the money.

When to sell. When you need the money.

The stock markets as well as markets for bonds, real estate, currencies, and other investments are complex systems controlled by many people whose collective actions cannot be predicted with accuracy. So we have to make choices without accurate predictions.

So, when I have money I want to invest, I don’t pay the slightest attention to my predictions about the near future (or anyone else’s predictions). Knowing that stock markets are volatile, I don’t invest any money that I think I’ll need within 5 years. When I do have some money to invest, I do so right away and don’t think about whether today is a good day.

Now that I’m retired, I sell stocks much more frequently than I used to. But I’m guided by the same principle. I try to predict how much money I’ll need over the next 5 years. If my current fixed income investments are too low to cover these needs, I sell some stocks right away without any regard for whether today is a good day.

This approach works best for index investors. Those who buy individual stocks have the additional problem of figuring out which stocks to buy or sell. I don’t worry about that. A happy side effect of this investment approach is that I don’t have to listen to any talking heads making stock market predictions that are just guesses anyway.

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