Buying high and selling low is the Achilles heel for many investors, professional and novice alike. It's an easy mistake to make. You would think the perfect time to buy shares would be when the economy is travelling well, and there are blue skies ahead.
Conversely, you would think the time to sell would be when the economy is in the doldrums and there are no signs of the storm clouds clearing.
Think again. As Warren Buffett's side kick Charlie Munger said, "Our best years were recession years. If you wait for the recovery, it's too late."
The time to buy is when the future is uncertain, when pessimism prevails. Not that you necessarily enjoy the pessimism, it's just that you like the share prices that prevail during such times.
The Bull Market Within
Yet bull markets will always be interspersed within those long time periods. As we've seen over the past couple of months, huge gains can be made by investors.
You just need to…
1) Not give up on the stock market. Once you go down the investing path, you should consider it a lifelong journey. Dipping in and out will virtually guarantee failure.
2) Consistently, ideally monthly, add new money to the stock market, whatever the economic conditions.
3) Buy individual shares during times of pessimism.
4) Sell individual shares during times of extreme optimism.
Despite the recent stock market rally, we remain in a period of pessimism. As such, it's an ideal time to be loading up on high quality companies trading at cheap prices