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:
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.
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.
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.
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.
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?