Buying low and selling high is every investor’s goal. Unfortunately, the opposite happens all too often.
Even shares of best-in-class companies are still hard to buy after a meaningful pullback.
Conversely, all too many investors get impatient and overpay for a winner, forgetting that even the best performers have to take a break every once in a while.
One solution to this problem: Set dream buy prices for stocks you want to own. Then resolve to purchase the stock in question if it falls to your dream price–regardless of your emotions at the moment. Alternatively, you can set buy-limit orders that will execute automatically if your target falls to your dream price.
This strategy worked best when the financial crisis and Great Recession sent the stock market spiraling lower from late 2008 to early 2009.
However, this approach also bore fruit on several occasions during the five-year bull market that followed.
Predicting the proximate cause and timing of the market’s next major downdraft is a fool’s errand; being prepared to profit from this opportunity, however, is prudent investing–assuming you pick the right targets.