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Easy to say; hard to do

Jan 14, 2020 | Heather Hardee


Timing the market is nearly impossible. Tranche investing may be a suitable approach.

Female hands taking notes on investment chart

Buy low, sell high. So much easier said than done.

Only a year ago, the markets were on a downward spiral. The Dow and S&P 500 closed at 21792 and 2351, respectively, on Christmas Eve. My guess is your stomach was in knots and you might have had 2008/2009 or 2014 flashbacks. While it was nauseating, those low points held more opportunity than we realized at the time. Most of us were worried markets might go lower. Fear was overwhelming and an optimistic market outlook was fairly non-existent. Now here we are, one year later, and markets are hitting all-time highs. Buy low, sell high.

The problem with buying low and selling high is our emotions get in the way. Markets run on two emotions: greed and fear. Greed is often the point of maximum potential risk. Conversely, fear, like we felt not too long ago, is the point of maximum potential opportunity. When things are good, we tend to get greedy because we want more. More gains. More winning positions. More. We hold onto stock trying to get more. When things are bad, you’re too afraid to pull the trigger and get into that stock you’ve had your eye on. What if it loses more value? What if it takes too long to recover? What if?

What if you take a systematic, disciplined approach to investing? Buying or selling in tranches is key. So you don’t want to take all the winnings off the table. Sell a third. If it goes higher, sell another third. Lock in your gains. If that last bit of your position takes a turn for the worse, you’ll end up feeling really good about taking some off the table earlier. Afraid to get in? Buy a third. Maybe the price goes up a little. Buy another third. Slowly establish your position. Because we never know where the tops or bottoms are, this approach allows disciplined investors to slowly lock in gains or get their foot in the door. The problem lies within our emotions and being able to control that greed and fear. Easy in theory. Hard in reality.

Will and I encourage you to check back often as we’ll be adding new posts fairly regularly, and please feel free to call or contact us with questions. We anticipate using this blog to discuss timely events, investment themes, among other financial topics. Stay tuned and we’ll see you soon.


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