Finance
UBS: ‘Buy low, sell high’ is a fallacy
- “Buy low, sell high” is a common mantra in stock markets.
- But it’s actually a “fallacy”, argues UBS’ Justin Waring.
- If you wait for the market to dip before buying in, you could
miss out on big bull runs. - It’s much better to just buy stock and hold it for the
long-term, he argues.
“‘This time is different’ is not the most dangerous phrase in
finance,” according to UBS’ Justin Waring. “That honor goes to
‘buy low, sell high.'”
Waring, Investment Strategist Americas in the Chief
Investment Office of UBS’ Wealth Management division, called the
phrase a “fallacy” in a note sent to clients this week. Not
enough people analyze the phrase, which really only applies to
traders and doesn’t offer much help to long-term investors.
The persistence of bull markets means investors who follow
this advice may miss out on market gains, Waring argues.
For example, imagine an investor buys a dip in the S&P 500
and then sells once it hits a new record high. Under the ‘buy
low, sell high’ mantra, that investor would generally have to
wait for a 5% or 10% dip in the market to buy back in. But, more
often than not, the market goes on to post new record highs after
setting one record.
Waring uses data on the S&P 500 stretching back to 1960 to
back up his argument.
“These market-timing approaches’ 2.5% p.a. returns are so dismal
– and lag “buy-and-hold” so badly – that we had to switch to a
logarithmic scale to even see them on the chart,” Waring writes.
“The core problem with waiting for a market drop, and selling out
at new all-time highs, is that you’re invested during the bulk of
each bear market but miss out on most of the bull market gains.”
Much better to simply buy stock and hold it for the long term,
Waring said, as the chart below illustrates.UBS
-
Entertainment7 days ago
NASA discovered bacteria that wouldn’t die. Now it’s boosting sunscreen.
-
Business6 days ago
Tesla drops prices, Meta confirms Llama 3 release, and Apple allows emulators in the App Store
-
Business5 days ago
TechCrunch Mobility: Cruise robotaxis return and Ford’s BlueCruise comes under scrutiny
-
Entertainment6 days ago
‘The Sympathizer’ review: Park Chan-wook’s Vietnam War spy thriller is TV magic
-
Business4 days ago
Tesla layoffs hit high performers, some departments slashed, sources say
-
Business5 days ago
Meta to close Threads in Turkey to comply with injunction prohibiting data-sharing with Instagram
-
Entertainment4 days ago
ChatGPT vs. Gemini: Which AI chatbot won our 5-round match?
-
Business3 days ago
Former top SpaceX exec Tom Ochinero sets up new VC firm, filings reveal