Keep it Simple: Buy Low and Sell High to Make Money

The idea of getting results through “passive” income is something that is popular in some personal finance circles.  I think there’s something about this that’s rooted in the human interest in getting something for nothing.  In this case, nothing means no time or effort expended.

Frankly, that sounds quite appealing.  I’m a believer in the notion that time is money, or actually more valuable than money since you can’t make more of it.  The less time we have to invest in something while still getting results, the better deal it can be for us.

Back to the “passive” concept.  Sometimes, I think there is a tendency for many of us to want to put things on autopilot.  For example, focusing on index funds and avoiding constant stock trades.  I like doing this, though admittedly there are transaction costs that play a role in my decision.  But the point is that we’re often looking for ways to make money without incremental effort.

But can we make more money for ourselves by simply taking a more active approach rather than a passive one?

Sometimes, maybe not.  Other times, possibly.  I think it comes down to remembering that when it comes to investing or making extra money, it’s often a matter of thinking about the concept of “buy low and sell high”. 

Here are a few examples of how buy low, sell high can be applied to make money:

Stocks

Yes, this may be the first thing many folks think about when it comes to buy low, sell high.  Yet, many of us also focus on index funds, dollar cost averaging, and other “autopilot” type of tactics.  I’ve been fine with that, as it allows me to focus time on other things.

However, there is something to be said about how the market does provide us with potential opportunities.  There is often some seasonality in monthly stock market returns, which may not occur all the time but trends seem to be there.  For example, a “June Swoon” is not a new phenomenon for stocks.  Additionally, sometimes markets overreact to bad news.  While risky, there are times we can actually strategically buy low and sell high.

Precious Metals

After years of being somewhat low profile, metals saw a resurgence of interest several years ago.  Many people likely made quite a bit of money buying gold low and selling at higher price points later.  Additionally, attention also went toward investing in silver, which showed great price appreciation before coming back down.  Is it a buying opportunity for metals today? Whatever one’s opinion it’s clear that people have made money buy strategically applying the buy low, sell high approach instead of passively buying and holding.

Real Estate

As we know, real estate surged in value in the early-to-middle part of the last decade, with fantastic year over year.  Then the bottom seemingly fell out, and prices plummeted.  If people bought low, when prices were at their nadir, it could have been a money making opportunity.  Around here, I’ve heard stories of people competitively bidding for homes again, and prices seem to be rebounding.  Unfortunately, so do interest rates as well.  Regardless, this could have been a good buy low, sell high opportunity.

Cars

Here is where we deviate from traditional investments.  Some people actually do make money buying and selling used cars, including different types of them.  Classic cars can sometimes be bought and sold for profit, and I’ve even heard of someone buying a hybrid car and selling it for a profit later as gas prices surged.  Again, examples of buy low and sell high.

Collectibles

Some collectibles have more clearly agreed upon market value than others.  Often times, some collectibles can have extra value for someone who really appreciate them for whatever reason, while having much less value for others.  For examples, a collection of Elvis Presley records from the 1950′s would have great value for some people but very little for others like myself.  There could be good opportunities to buy such things from people like me, and sell to hard core fans for much more.

Bottom Line – sometimes by getting out of the passive/autopilot/low effort mindset, we might actually make more money and get potentially out-sized returns.  No guarantees, but sometimes active effort yields extra results.

My Questions for You:

Do you ever think about the concept of buy low, sell high in terms of money-making opportunities?

Or, are you more of a buy-and-hold, or autopilot type of investor?

Can you think of any other situations in which you’ve taken advantage of buying low and selling high?

Comments

  1. says

    Though I’m more of a ‘buy-and-hold’ type, I’ve tinkered with buy low, sell high. I’ve usually concluded in the end that the time required to try to make this approach succeed isn’t worth the likely payoff, at least for me.

    • Squirrelers says

      For stocks, that can make sense of course. I’ve written about this plenty here :) Of course other things that don’t appreciate in value might be different.

  2. says

    I used to think I could buy low and sell high, which is another phrase for time the market. And then I did the opposite and lost a large amount of money. I decided to try John Bogle’s methods of buy low-cost passive index funds, rebalance once or twice a year to my desired asset allocation, and stay the course. That worked very well through the Great Recession and up to today.

    • Squirrelers says

      Bryce – I tend to be more of an index fund person actually, though there can be some opportunistic purchases here and there. In areas outside of stocks, there are times when flipping might work.

  3. says

    I sold a hybrid for a “profit” one time. I had a Prius I had owned for about 2 years with about 45k miles on it. This was immediately after the earthquake in Japan that shut down Toyota factories for a while, and gas was sky high. The result of these 2 situations was the resale value of a used Prius was sky high.

    So I went to my Toyota dealership and asked about trading in my Prius for a new one. They said the new one would take months to get, but that my used one was worth so much they would give me the new one for my used car and $1,500. I took that deal and I got my new Prius when it came in about 3 months later. I effectively traded 50k miles for 1,500 bucks which according to this online calculator cut my cost of driving by about $0.04 per mile. I call that a profit!

  4. says

    We bought our house low, at a time of the year nobody usually buys (Christmas) and at a time in our market that nobody was buying. We bought it for $140K less than the original list price. My fiancee is a carpenter so we’ll be able to sell it for much, much more.

  5. says

    I’m definitely a buy and hold type of investor. I pace myself when I’m trying to buy into a new investment so I can get the market timing. I can never get the timing perfect by any means, but I’ll take advantage of dips when I see them.

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