Everyone has heard the old saying when it comes to stocks: “Sell High, Buy Low!” But can that advice be taken out of context? In the car the other day, I heard an investment advisor marketing his investment firm on a commercial. He said something that caught my attention and created the need to send you the other side of the story.
DISCLAIMER – THIS IS FROM MY MEMORY AND NOT WORD FOR WORD. However, the context of the marketing is accurate. He said, “As a financial advisor, I can’t guarantee anything except one thing. You should always buy stocks when they are low (in price), and today, stocks are on sale! So the conclusion is that stocks are a good buy because they have lost some money, and stock prices are definitely lower.
There are a few things worth noting. First, the commercial should have stopped right when the spokesperson said, “as an advisor, I can’t guarantee anything” because that is a fact. I’ll note this again for emphasis: an advisor cannot guarantee anything. Here is the question that an investor should have when listening to the advice of always buying stocks when they are lower:
Are they still a good buy if they lost an additional -30% more in value?
I believe investors are all on board to buy stocks at their low points. However, most investors I know would only do so if they felt confident that stocks did not have way more to lose.
As I have always said, there is a big difference between an opinion and a fact. It is the advisor’s opinion that stocks have gone low enough to warrant buying: facts you can guarantee and opinions you cannot. Time will validate that opinion one way or another.
Keep in mind that traditionally, bear market cycles can last a lot longer than our current one and incur much bigger losses. Low can always go lower, making that guaranteed advice not so guaranteed.
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