Obvious right? Unfortunately this is nearly impossible to accomplish one hundred percent of the time, therefore the *asterisk. However, you can accomplish this with most of your investing by holding onto your investments. Buy low, hold, hold, hold, … hold, sell high. But, even then, do you want to sell?
Time can cure lots of ills, including short term price corrections. Time leads to compounding (given prevailing interest rates). Generally when you have done your research, are diversified amongst assets that you know and understand, and hold for a long period of time you will have the opportunity to sell at a higher price then you bought. This holds for at least the majority of investments.
Always look to get a deal and find things that are cheap and selling for a ‘low price’. That’s great. But, don’t ignore great things that are more expensive either. Good things come in all shapes and sizes if you know what to look for. Again, I’d suggest reading some Graham & Dodd to understand investment moats as well as some of the other books in the resources page.
You don’t want to let market gyrations force your hand into selling investments you like. When you buy low and the investment goes lower, don’t sell – re-evaluate your view of the company and if it is still positive buy more to cost average down, then hold until it’s higher. And even then, hold. Traders try to take advantage of all kinds of psychological behavior for short term gains, including loss aversion (which I am telling you is generally a good thing – you’re not a trader and so do not need to harvest your losses) and endowment effects. Don’t be a trader looking for short term gains. Let the paid traders buy low and sell high, or vice versa – if they can. Over the long term by buying and holding good companies, you’ll be better off.
Ultimately you want to keep your portfolio as stable as possible. You want to buy assets that will always be increasing their value to the point that you know they will perform in-line or better than the market on average. If you are comfortable knowing this then you will never need to sell because the investment will always be increasing given the markets positive expected returns.
Please, next time you hear someone simply say buy low, sell high tell them there’s more to it and to stop thinking like a meat head day trader. You have to hold, and hold…and hold, and then the question will be whether to even sell higher at all.