Catching a falling knife or Bitcoin...
Reflections on catchy sayings: buy low & sell high
This is a famous quote often attributed to financially successful traders, but is it really good advice or is it actually foolish or at worst dangerous to your financial health?
It seems to me that it’s like catching a falling knife.
If you think about it, in the real world when the price of an investment is falling or when something is selling near or at an all time low... how wise it it to buy?
Buy low and sell high sounds simple and more important, easy. But do you or I have the “intestinal fortitude” or “the guts” to buy at the low?
Warren Buffet on buy low and sell high
A quote frequently attributed to Buffet was buy low and sell high. I am unsure he ever said that phrase. He did however say many times buy low and sell never. As a dividend investor he liked to buy companies with good earnings and use his influence on the board of directors to vote for increasing the dividend. He kept these sticks because they appreciated and because they paid good dividends.
Let’s look at an interview of one of America’s most popular and respected billionaires; Warren Buffet how he got rich. He was asked if he believed in “buy low and sell high”.
Here are a few of his answers:
First one:
“Most people get interested in stocks when everyone else is interested and the price is high. The best time to get interested is when no one else is interested and the price is low”.
“Look for good companies, with low prices and buy all you can afford, using money you can afford to lose.”
Second one:
“You can't buy what is popular and do well."
Surely we all can see the wisdom in not buying when things are near their all time highs and waiting for the pullback is taught in most stock and asset trading classes.
This makes sense, when Bitcoin was above 64,000 it was very popular, but also near its all time high. How popular is it now that it dropped to 30,000? If it was a good buy at 64k is it a great buy at 30k or a horrible buy?
Third one:
“Investors should try to be fearful when others are greedy and greedy only when others are fearful."
Oddly enough Bitcoin and many other cryptocurrencies have more buyers at their all time highs, then at their lows.
Conclusion:
I think the secret is finding good companies, when their not popular and their price is low. I think his phrase “Be greedy when others are fearful and fearful when others are greedy” ... is insightful. Bitcoin had more investors at a price of 60,000 USD then at it’s recent price of 30,000.00 USD. That’s human behavior, but hopefully you can see how faulty it is, and financially harmful. My advice is a carbon copy of Warren Buffets advice. I think buy low in crypto means buy on the dip. And I try to buy on the dip with all cash I can afford to lose at the time. Even if I buy 1/10 of a bitcoin at a good price I am still ahead. I think you need to be patient and wait for the dips. It’s easy to buy at the high due to the fear of missing out “FOMO” this is a real force in the trading world, which we all must keep in check.
Last Quote
One of Buffets quotes I keep in mind when I am dealing with FOMO is
“The stock market is very efficient at transferring wealth from the inpatient to the patient”
I don’t know about you, but I think this quote was about FOMO and quote was made before the term FOMO was invented LOL 😂
✍️Penned by my hand.
Shortsegments is a writer focused on cryptocurrency, the blockchain, non-fungible digital tokens or NFTs, and decentralized finance.
Read more of shortsegments articles here: https://leofinance.io/@shortsegments
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Great comparison of the falling knife and the falling crypto market !!!
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Thanks
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Those are some really great quotes by him. I think the part about only using money you can afford to lose is really important. I also like the bit about getting interested in stuff when no one else is. That makes a lot of sense. I bought a little bit of BTC on its way down. I probably should have waited a bit longer, but oh well.
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I agree
I bought bitcoin on the way down also, no regrets about not getting it at 30k, its hard to call a bottom, I can wait for it to appreciate, meanwhile I put it in DeFi and earn every day :)
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That sounds like a really smart move! I have most of my satsoshi's in a cold wallet.
Well yes the emotions in the markets causes a ton of FOMO and people just keep throwing away their impatient money to those that are patient.
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ha ha
exactly
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Buying new stuff low is easy-- stuff is on sale.
No one wants to sell at the low, but sometimes circumstances dictate that (such as a bankruptcy or a brutal divorce).
What's difficult is holding/hodling existing investments at the low. That's where we need both intestinal fortitude and guts, plus a good measure of moxie.
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