Why is it so difficult to buy low and sell high?

A year ago, after the huge bull market in 2021, I pointed out that investors chasing hot results are often burned to death, and just last week I described how investors fleeing volatility may always not get what they want.

Blogger Ben Carlson recently pointed out: The two columns are almost a full year apart, like bookends. They show the opposite polarization of the stock market and shareholders. Why is it so difficult to buy low and sell high?

When you buy high and sell low, you choose the path of least resistance: in a bull market, buying high feels great. Bash! But selling at a high price — or just buying more at a high price — is hard to do. It feels like you can't discourage people at a party; you must participate. I'm afraid I'll miss out on the best opportunity to make money easily.

In a bear market, selling at a low price brings relief (at least in the short term). At the same time, buying at a low price — or even staying the same when others panic — feels like throwing money around.

Buying and holding investments is often derided as a blind “one and for all” approach. But don't ignore the fact that resisting extreme market forces requires great emotional discipline.

It's relatively easy to set it up, and the hardest part is to forget it. Every day the investment industry bombards you with hype about recent performance and pretend to anticipate the future, trying to get you to buy high and sell low. That's why discipline is so important.

As Cliff Asness, founder of AQR Capital Management, said at an investment conference at Columbia Business School last week:

“Insanity is defined as doing the same thing over and over and expecting different results. When you feel it punishes you over and over again, there's no need to be 'insane, 'to stick to a great investment process,' it's your job”

Excerpt from Jason Zweig Feb 2023