BY COLLIN HARNESS
Most people have heard the phrase: “Buy low, sell high”
And in some cases this works. I bought a cheap piece of real estate and sat on it for years as it appreciated in value.
But this phrase mostly applies to the stock market and it is wrong.
Every time I have bought a “cheap” stock aka businesses they continued to go down in value and it took decades to recover or it did not recover at all.
I now have a rule: “Do not buy companies circling the drain.”
I have another rule: “Do not buy companies on their IPO day”
When you buy stocks on the cheap it seems enticing. You get more for your money. Amazon is expensive! Thousands of dollars only gets you one lousy share.
But that one share of Amazon is worth so much more the many shares of Ford are going to get you. Because Amazon is a better business. I am not saying that Ford is a bad business or that you will not make money buying Ford stocks. It is just my opinion that Amazon is growing faster than Ford and return better net income over the next decade than Ford, thus translating in high stock price growth.
My best returns have come from buying into companies that have been successful and continue to be successful. I bought Facebook early on and have added to my position as the stock reaches new all time highs.
I buy high, prefer to never sell and sell extremely high if I need to use the money.
Because great companies are going to continue to win. My thesis is that Apple is going to be bigger in 10 years than it is today and it is already massive. Same for Starbucks, Walmart, RH, Salesforce.
I love betting on great companies and riding that wave even higher.
The same could be said for the overall market.
Buy VTI – Vanguard Total Stock Market Index
The stock market constantly reaches all times “highs” and yet it continues to climb higher.
Buy high, sell extremely high.