The Buy Low and Sell High Method — Tough, But It Works

Who knows how long this correction will last, but it’s well deserved. Perhaps it is time to just go away in May like the old saying goes. However, I would say that the fundamentals of the domestic economy are intact and, while the stock market’s been running hard for quite a while, a prolonged correction is a great buying opportunity.

And, this buying opportunity is still most opportune among large-cap companies that have the pricing power to accelerate earnings over the next several years.

In fact, if you aren’t a regular buyer and seller of equities, you might as well just wait out the current turmoil and get ready to invest in the index through an exchange traded fund (ETF). This is the single best strategy to plan for over the coming months. It’s simple, easy and it makes sense to me.

Like I’ve been saying in my writing, confidence-changing events like the debt crisis in Europe can very easily sideswipe a marketplace. Just consider what happened on Wall Street, where sentiment remains in a high state of fragility. But, these big, fundamental problems in the global economy represent the biggest opportunities for those investors with the patience and guts to try to buy low and sell high. As you know, the best trade last year was just buying the index in March when everything was coming apart. Many large-cap stocks have more than doubled since that time.

Right now, the fundamental backdrop in the domestic economy is getting better. We still have interest rates that are extremely low, and the housing market is stabilizing and so is employment. We have the prospect of inflation ahead and this gives corporations tremendous new pricing power to accelerate earnings. The price of oil is reasonable. The technology sector is experiencing a new cyclical upswing. There are a lot of positives for the economy going forward and you have to separate this from the noise on Wall Street.

Again, I think one of the best trades going forward will be buying the index. We’re not there yet. We have to let the current debt crisis play out a little longer. Further to that, we have to let the equity market consolidate further. It needed this anyway.

Sometimes, the simplest investment strategy is the best. But, it takes a lot of patience to wait for good buying opportunities. They don’t come around very often. If they did, there would be a lot more retired equity traders on the golf course. Buying low and selling high is the simplest, most common-sense investment strategy you can follow. It’s also one of the most difficult strategies to execute well because it’s always a waiting game.

Here’s what I like right now: gold, silver and copper miners; large-cap technology; the Dow; dividends; one or two U.S.-listed Chinese plays for fun. Not too complicated, if you want to own equities.

The debt crisis in Europe isn’t over. I think investors should watch it play out and then get ready to pounce.

Who knows how long this correction will last, but it’s well deserved. Perhaps it is time to just go away in May like the old saying goes. However, I would say that the fundamentals of the domestic economy are intact and, while the stock market’s been running hard for quite a while, a prolonged correction is a great buying opportunity.

And, this buying opportunity is still most opportune among large-cap companies that have the pricing power to accelerate earnings over the next several years.

In fact, if you aren’t a regular buyer and seller of equities, you might as well just wait out the current turmoil and get ready to invest in the index through an exchange traded fund (ETF). This is the single best strategy to plan for over the coming months. It’s simple, easy and it makes sense to me.

Like I’ve been saying in my writing, confidence-changing events like the debt crisis in Europe can very easily sideswipe a marketplace. Just consider what happened on Wall Street, where sentiment remains in a high state of fragility. But, these big, fundamental problems in the global economy represent the biggest opportunities for those investors with the patience and guts to try to buy low and sell high. As you know, the best trade last year was just buying the index in March when everything was coming apart. Many large-cap stocks have more than doubled since that time.

Right now, the fundamental backdrop in the domestic economy is getting better. We still have interest rates that are extremely low, and the housing market is stabilizing and so is employment. We have the prospect of inflation ahead and this gives corporations tremendous new pricing power to accelerate earnings. The price of oil is reasonable. The technology sector is experiencing a new cyclical upswing. There are a lot of positives for the economy going forward and you have to separate this from the noise on Wall Street.

Again, I think one of the best trades going forward will be buying the index. We’re not there yet. We have to let the current debt crisis play out a little longer. Further to that, we have to let the equity market consolidate further. It needed this anyway.

Sometimes, the simplest investment strategy is the best. But, it takes a lot of patience to wait for good buying opportunities. They don’t come around very often. If they did, there would be a lot more retired equity traders on the golf course. Buying low and selling high is the simplest, most common-sense investment strategy you can follow. It’s also one of the most difficult strategies to execute well because it’s always a waiting game.

Here’s what I like right now: gold, silver and copper miners; large-cap technology; the Dow; dividends; one or two U.S.-listed Chinese plays for fun. Not too complicated, if you want to own equities.

The debt crisis in Europe isn’t over. I think investors should watch it play out and then get ready to pounce.