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Buy Low, Sell High

October 17, 2008

Good luck trying to find anyone in the United States who hasn’t heard the advice to “buy low, sell high,” yet it’s becoming more and more difficult to find people who are actually willing to follow that advice.  That’s why I appreciate this editorial by Warren Buffet.  Read it — there’s a reason why Berkshire-Hathaway stock sells for over $100,000 per share and Buffet is considered to be the wealthiest man in the world.

An excerpt:

I’ve been buying American stocks…

Why?

A simple rule dictates my buying: Be fearful when others are greedy, and be greedy when others are fearful. And most certainly, fear is now widespread, gripping even seasoned investors…But most major companies will be setting new profit records 5, 10 and 20 years from now.

Something Buffet does not point out here that I will is another big reason to buy U.S. stock right now: it’s one thing that anyone can do to help the economy.  As you invest, the stock you buy becomes more scarce, and therefore more valuable.  The company you have invested in has more money for new projects and new products, which in turn generate more revenue which also increases the value of the stock.  As the value of the stock increases, other investors are attracted to buy it and the cycle repeats.  It’s what keeps the market healthy and gets you the earnings that Buffet forecasts in his opinion piece.

Once again, I can’t tell you what to do with your money and you should always seek out a financial advisor before investing.  If you want my opinion, however, it’s this: buy low, buy now, buy American.

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