FP Article 3
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Buy Low, Sell
by Rajen Devadason
you can keep your head when all about you
Are losing theirs and blaming it on you
If you can meet with Triumph and Disaster
And treat those two impostors just the sameÖ
ÖYouíll be a Man, my son!
||Be honest now!
Has this ever happened to you?
You've clambered onto a roller
coaster, as part of a dare or simply because all
your other friends have rushed aboard. You then
tried your hardest to make sure the terror
in your heart
is not betrayed by even the slightest tremor on
after the ride began, you
felt your stomach stay at the top of the rise
even as the rest of you hurtled down?
youíre a glutton for punishment - and
adrenalin-inducing thrills - youíve probably
done that more than once, sometimes in the same
afternoon, while on holiday in some magical
place like Disneyland, perhaps. Intriguingly,
there are great similarities between the
emotions felt during a roller coaster ride and
those experienced during periods of great
I can say that with confidence
because I've gone on my fair share of roller
coaster rides, mainly in the US, and
Iíve spent many years observing, participating
in, losing and gaining at the serious game of
equity investing, primarily in my home country
This is an article on the need to
truly buy low and sell high in the
investment arena IF your goal is to
prosper over the long haul. I hope
you enjoy reading it. But if it isn't what
you're looking for, you're welcome
to search for something that better meets
your needs. Thank you for allowing
me to serve you.
Iíve lost money as markets crashed, and made
money as those same markets recovered.
Through all my travails, what Iíve learnt is
that when it comes to riding the investing
Ďroller coastersí, my emotions are not the best
barometer to guide my actions.
me tell you why:
When markets are high, I tend to get greedy and
feel the urge to jump in with even more money.
When markets are low, I suffer pangs of fear and
panic that cause me to want to bail out.
I have done both often enough to realise that
those courses of action are usually the wrong
things to do at those times. In hindsight, it
almost always seems the best course of action
would have been to do the exact opposite of what
my gut feelings were shouting out for me to do.
Now, Confucius once pointed out, ďA superior man
is the one who is free from fear and anxieties.Ē
inclined to agree with that ancient Chinese
sage, but the truth is when it comes to
investment markets, only two emotions tend to
reign supreme - fear and greed.
both breed anxiety!
you want to have just as an exhilarating a time
in the investment market over the long-term, as
you do on a wild roller coaster over the
short-term, put in place strategies that allow
you to exercise almost Vulcan-like control over
those pesky emotions!
And, if you lack the self-discipline of Star
Trekís Sarek, Spock, Tuvok or TíPol, as is
the case for almost all humans, then embed
strategies that allow you to distance your
investment decisions from those emotions.
my day-to-day work as a Securities
Commission-licensed financial planner in Malaysia, I utilise two strategies
called dollar-cost averaging and value-cost
averaging that allow investors to protect
themselves from their own highly developed
tendencies to give in to fear and greed at the
worst possible times.
will briefly describe them later in this
article, but those interested in learning much
more about both dollar-cost averaging (DCA) and
value-cost averaging (VCA) are welcome to read
and download, if you like, the far more
RESOURCE ARTICLE 5
in my archives at
that I believe you'll find useful.
WHEN INVESTING, LEARN TO
DISTANCE YOURSELF FROM YOUR EMOTIONS
people who succeed over the long haul in
investing are the courageous. That isnít too
surprising. The courageous tend to dominate
every field they venture into.
that is, their courage is tempered with wisdom
and strategic knowledge.
canít help you with the first. Wisdom, in all
her glory, you will have to nurture through long
years of study, thought, experience,
contemplation and well-directed practice.
strategic knowledge, you can begin to pick up
from books. One that Iím rather fond of is my
very first book,
Your A-Z Guide to the Stock
Market Ė And all You Need to Know About Capital
Terms. It contains 1,001 terms that are
cross-linked in such a way that you will be able
to decide in which direction you want to begin
your exploration of financial and investment
terms. (If you would like to order a copy, you
may do so
already know that the oldest formula in the
world to make money in business or investing is
to buy low and to sell high.
Frankly, in the game of growing long-term
wealth, nothing has ever been invented that can
beat that easily understood strategy.
Whether itís wheelbarrows or widgets,
pharmaceuticals or paper assets, the only way to
grow rich is to buy low and sell high.
Thankfully, in the investment world you can
employ excellent strategies like dollar-cost
averaging and value-cost averaging to
effectively buy low and sell high.
the case of dollar-cost averaging, you invest
equal amounts of money, at equal intervals,
regardless of market conditions. The net result
over many years is that you end up doing most of
your buying at the lower end of the price
end up buying low.
then can wait for a time of market strength to
Value-cost averaging is similar in concept to
dollar-cost averaging, but instead of investing
equal amounts, you invest variable amounts that
are (kind of!) inversely proportional to the
market level. So the higher the market is, the
less you invest, and the lower it is, the more
if all you have today is a small amount of money
to start with, I would urge you to save a bit of
that money in the bank each month to build up
your emergency buffer account, and then invest
the rest in a proven mutual fund or unit trust
fund, which is an investment vehicle that pools
or collects relatively small contributions from
many investors with similar financial aims.
key thing is to get started.
Procrastination may be best known as the thief
of time, but in the world of personal finance it
is actually a much more effective thief of
Donít let it rob you... blind!
Act today Ė
increase your knowledge, save your money, and
commit to becoming a lifetime investor!
however, if you feel you aren't quite ready to
start investing seriously because you need to
learn to save first, then do help yourself to
the information in these 2 free articles:
How to Start Saving Money
What is a Cash Flow
(And if your Number 1 Goal for the future is to
learn how to set powerful, effective goals, you
may want to read my
ebook on goal-setting entitled
© Rajen Devadason