Adrian Mastracci

By Adrian Mastracci
Sounding Board
The Vancouver Board of Trade
October 2002 Issue

How often have investors wished they had bought when prices were low? Especially, during a bear market that refuses to fade away!

I know that stepping up to the plate during the grips of a bear market means that the investor’s mentality is different. This unusual behaviour is well known as the buy low, sell high concept. However, for many investors it remains only a concept.

Bear markets don’t last forever. Nevertheless, it takes loads of confidence to be a different and contrarian investor. Especially, when the outlook is full of uncertainty and the majority of investors are sitting on the sidelines.

It may be hard to fathom, but there is a positive twist to every bear market. Some brave investors buy good investments at bargain prices. Sometimes, they are on sale more than once!

Let us assume that an investor can tolerate the risk and wants to do better than the majority of investors. That requires doing something that the majority is not doing.

That something is buying investments when pessimism is rampant and hardly anybody wants them. Like now, when uncertainty flows like Niagara Falls and the majority are not buying.

Far too often, investors kick themselves for not having bought when prices were low. This is often in total hindsight, of course.

So, what does it take to be different? Well, it is simple, but certainly far from easy.

Let us examine the 1-2-3s of a buy low, sell high investor:

• Has the foresight to buy during a bear market, before investor exuberance returns.
• Does the homework and sets out the course of action before stepping up to the plate.
• Refrains from getting fancy with the investment portfolio.
• Buys investments that can be held a long time.
• Buys investments that fit the personal criteria, not the salesperson’s criteria.
• In short, buys on sale when the herd is not.

The desired situation before buying low is the exact opposite of what we had in early 2000. Just recall the exuberance when investors bought practically anything at any price. Now, few are buying at practically any price.

Yes, things can get worse, so assume that they will. That is why investor patience needs to be plentiful when buying low. After all, there will be bumpy patches along the way.

The traits of a buy low, sell high investor are about stepping up to the plate and spreading the investment bets when the majority of investors are not. One way to tell is when the majority sees lots of gloom in its forecast.

Buying low, selling high is about being a leader, not a follower.

NOTE: The information provided above is intended for general informational purposes only. It does not constitute advice for anyone's specific situation. Everyone should always first consult directly with their advisors to determine the appropriateness of any information contained above before taking any action. KCM Wealth Management Inc. assumes no responsibility for any loss or damage arising from the use of, or reliance upon the above information.