Buy low, sell high.
These four words have harmed and misguided generations of individual investors.
Here's why?
Trait #3: Strong Past Price Appreciation
For years, "buy low, sell high" has been burned into our brains. It sounds nice, but history tells us it's not the best strategy.
Rule Breaker investors focus primarily on the business, but in this case, a stock that is performing well can tell us a couple of things.
The market recognizes what is happening
The company is most likely operating effectively.
"If a stock is consistently winning, that is an excellent sign. Instead of buying low, selling high, it has you buying high and trying not to sell."
Amazon is the classic example of a stock that scared many investors away because the stock performed so well. Several rushed to sell when they should have been buying at all-time highs.
Amazon isn't the only example. In 2010, David recommended Lulu Lemon for the Rule Breakers service. The stock performed well in the past, traded at 53 times earnings, and was considered overvalued.
What did people say when they heard the recommendation?
"Why would you overpay for yoga pants?"
Lulu Lemon is up 9 times in value since the recommendation.
There are exceptions to every rule, but objects in motion tend to stay in motion. Whether a stock is heading up or down, there's a good chance it will continue in the same direction over time.
So maybe browsing the all-time-high list is a good place to start.
"Winners keep winning."
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