An Investor’s Roadmap for Finding and Buying Low-Priced Stocks
‘Buy low, sell high’ is the time-honored proverb of investing. Investors who wind up ahead of the game have successfully bought low enough often enough, while investors who wind up out of the game have bought high and sold low once too often.
Since ‘buy low, sell high’ is the fundamental maxim of investing, there are, of course a plethora of ‘buy low, sell high’ schemes promoted by one self-serving party or another to lead investors to the promised land. With the so-called electronic highway, the ‘buy low, sell high’ pitches will probably crop up on computer screens with great regularity.
Many of the promises with which we are inundated tend to miss the boat. In order to effectively buy low and sell high, investors have to truly buy low. So, the appropriate question to ask is: “Do you really tend to buy low?”
Take the average stock price on the New York Stock Exchange. The average price of all stocks traded last year was $34.12, right about in line with the historical range where stocks trade of between $30 and $40.
Yet, while most buying and selling took place in stocks in the $30 range, that is not where the gains were to be found. While last year’s average price was higher than the prior year’s figure of $33.97, it was only higher by $0.15, or 4.4%. Another measurement, the NYSE composite, was up only 7.86%.
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