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Remember, buy low, sell high. Buying at $365 over thanksgiving weekend would be buying low. Buying here is pretty risky, since all the indicators are pegged.

• bunderbunder 15y ago
  . . . index funds . . . Just tangenting off of that: Since many indexes are weighted by price, I find myself wondering if index fund investing has an element of "buy high, sell low" to it. For example, right now Apple alone represents a huge percentage of the S&P 500,* and at the beginning of September 2008 it was weighted heavily toward a number of financial firms who were soon to be making a lot of appearances in newspaper headlines. Back to the price talk, though, what's striking to me is that even though its price has been skyrocketing, AAPL's P/E is still comfortably lower than GOOG or YHOO. * (And that alone should argue for thinking twice before buying Apple stock if you already have any money in an S&P 500 index fund. I have more money in Apple than any other company, and I've never personally purchased a single share of their stock.)
  • MikeCapone 15y ago
    You are correct, that's why people like Joel Greenblatt want to create equally weighted indexes.
  • pnathan 15y ago
    That's a big reason I've steered clear of "top ten" funds lately... I just don't want that much AAPL in my portfolio. Especially the 1Q AAPL curve: very bubble-y. I'd be much more prone to buy if it was a steadier growth curve instead of an exponent.
    • nirvana 15y ago
      Take a look at the Apple weekly chart going back to 2004. ITs really impressive. There's some pain in the 2008 era, and its clear the angle shifted in 2009 (when people accepted the iPhone was a success).... and then it went completely vertical this quarter. By that weekly chart, I think a good price for Apple would be $420. I'd be much happier if it had gone up to $450 on earnings (like it did, those were fantastic earnings) and then settled down somewhere in $400-$450.
  • bcressey 15y ago
    Since many indexes are weighted by price, I find myself wondering if index fund investing has an element of "buy high, sell low" to it. Only if you buy shares of the fund when they are high, and sell when they are low. An index fund that buys a set of stocks in proportion to market price at one point in time will automatically capture the relative gains and losses within that set. If Apple's share price doubles, then the market value of its shares that the fund owns will also double, and it will occupy a relatively greater percentage of the fund's portfolio. Companies with a flat or declining share price will account for a relatively lesser percentage over time. Some buying and selling needs to happen, to accommodate new investors and to handle turnover within the target index, but the point of passive index funds is that you don't need trades to capture market performance.
• juiceandjuice 15y ago
  Or if you're sure it's gonna go to 360 you could short it, then be long again at 360 :)
• scott_s 15y ago
  The problem is recognizing what's low and what's high. Back when Apple was around $365, I still thought that was "high." Hence, I don't play the stock game.
  • Homunculiheaded 15y ago
    Agreed, I was always under the impression that 'buy low, sell high' is stated somewhat tongue-in-cheek in the same way you could say 'the secret to winning football games is to score more points than the other team'
    • nirvana 15y ago
      I'm sure a lot of people do say it that way. But there is a very real phenomenon-- when the price is high, people want to buy, when the price is low, people want to sell. I had a friend who was a gold dealer and I would talk to him periodically about his experiences. When gold prices are high, he'd be out of stock because everyone would turn up in his store wanting to buy gold. (often because the media was talking about record gold prices and people would say "damn, I should have bought when it was $300! I'm buying now!") When the price is low-- gold dropped to $1,500 or so lately-- people sell because they think its a bad investment. A lot of those people selling at $1,500 bought at $2,000 and have watched it go down and are now swearing off of gold. (Without regard to the fundamentals that indicate gold will likely hit $5,000 in the next 5-6 years.) Buy high, Sell low is the reason so many people think the stock market is a gamble. Their emotions got the better of them.
  • nirvana 15y ago
    This is absolutely true. What I've found is that there isn't a silver bullet for this, and to mitigate it I use several techniques. One of them is, just don't pay attention to many stocks. Focus on specific stocks which offer the likelihood of outsized returns. PEG is just a quick check but Apple's growing at %70-%100 a year but trading usually under 15 times earnings making it a way to buy very high growth cheaply. Another method is to wait for the stock to be near its 200 day moving average. A third method is to phase your purchases of stock over a period of time. If you have $10,000 to invest, spend $2,000 a month on the stock... preferably when its at or near its 50 day moving average (or well below it if you get that chance.) Also useful is to recognize that "high" and "low" will change depending on what time horizon you're looking at. Over 10 years, $580 is probably a really low price. Over 10 minutes, who knows. I wouldn't buy common stock unless I planned to hold it for 5-10 years. For most people that's the way to approach it and buy these really stellar companies (you don't have to be in everything. Who knows if netflix is going to outperform everything on the market over the next 10 years or not. If you get a fantastic return from the stock you do invest in, its silly to kick yourself for not investing in the winner.) I looked at Apple when it was $13 a share and said "Damn that's a good buy, they have $6 a share in pure cash." And I didn't buy. I didn't buy for a decade after that. I never thought Apple was a company I understood well enough, despite following the company for over 30 years at that point. I made my first Apple investment in December 2011, around $380 or $390, and totally missed the bottom. (Meanwhile in 2001, I knew there would be a housing bubble, placed myself to profit from it, knew it was going to burst and went short the housing market in 2007... a year early, but you don't complain about once in a lifetime setups like that.) You're never going to time it perfectly-- I'm really proud of my 2007 discipline, to switch positions when every TV channel was screaming that I was wrong (actually one of the indicators that gave me confidence). If I'd bought Apple at $14, and it had gone down to $10, was it a bad buy? With hindsight you can see it wasn't... the thing to nail is whether the company has a solid future. I didn't know when Apple was at $14, but I do know now. (And yes, they do. They've got a lot of growth and while Steve Jobs liked the term "magical" there's actually nothing magical about Apple at all. No special insight, no secret, just really solid execution and focusing on the right things. Any company could do it... the question is why they don't, not why Apple is able to do it.) Finally, if you're willing to spend some time learning, I highly recommend McMillions "Options as a strategic investment". Its something like 1,000 pages. Read that and you'll really level up. (Options allow you to dial up, or down, risk as much as you wish. But they do take some focus and thinking. But they're not hard. You don't need to read the whole book, but if you do, you'll have passed a hurdle that says its time to spend some time playing with a paper account for about 6 months, then after that, you can start working with real money. You don't want to jump into options uninformed and full of confidence.) BTW, you said you "don't play the stock game", and that's fine... you're making a valid point about the difficulty (impossibility?) of timing, and I wanted to respond to that for those who have an interest in playing the "game".
• powertower 15y ago
  > Remember, buy low, sell high. Over the years, I've learned it's more effective to: buy when there is doom and gloom (blood on the street), sell when there is nothing but good news (about the company, industry). For example, when there is a crash and everyone is saying: wait some more, the bottom is not reached yet, it's all going to shit, then buy. You should also always buy in steps, buy 30% now, wait some more, buy another 30%, wait some more, buy remaining 40%. This helps tremendously with your nerves and emotions.
  • beatle 15y ago
    Apple's PE is only 17. ridiculously low considering Apple's revenue/profit/cash growth. Google's PE = 20. Amazon's PE = 134. Both not growing nearly as fast as Apple. 1. Apple's Last quarterly earnings DID NOT include China's iPhone 4S sales. Plenty of room for growth. 2. the iTV will be another billion dollar revenue stream for Apple. 3. NFC. Apple earning $$$ each time 100+ million people use their iPhone/iPod touch to pay for something? we're looking at a whole new ball game fellas.
    • smackfu 15y ago
      Eventually Apple will run out of people who can afford to buy iPhones and iPads.
      • r00fus 15y ago
        They said that about Apple's Mac and iPod five years ago. Notice they introduced two entirely new product lines since then? The company has proven over and over that it can branch out, and disrupt or define entire new markets... this is in addition to their incredible P/E ratio and unfathomably large cash hoard. That and without stock splits, dividends, or stock buybacks.
      • beatle 15y ago
        people replace their phones,ipads,laptops,TVs, etc. did I mention NFC?
      • Gilpo 15y ago
• joering2 15y ago
  > Remember, buy low, sell high. This is the funniest thing one can ever say about investing, lol! I would reply: f*ck the stock market: just remember to pick the right lotto numbers!
  • nirvana 15y ago
    You seem to be indicating that the stock market is worse than or equal to playing the lotto. This could be quite true for many people. When I was a buy and hold investor, I'd calculate my expected return before buying the stock. You can actually calculate the percentage annual return you'll get from the stock before you buy it. Sure there's some risk, but you also can discount that risk. IF the risk discounted price you need to get the return you desire is higher than or equal to the current stock price, you buy the stock. My results from that were pretty eye opening-- every single stock where I followed that discipline, returned more than I expected over the period I held it (and I was holding them for the long term- 5 years or more.) Of course I've also lost money by buying hot companies, or failing to exercise the discipline to limit what I was doing to mathematically rewarding choices. I'll play poker, but never with more than $20 at risk. I've lost less than $5[1] my entire life in casinos because the games are not interesting because the returns are negative. I've never played the lotto. I never take a position that does not have a risk adjusted positive return. Maybe that takes more discipline than other people want to put into it... That's fine. I certainly can understand the difficulty of dealing with emotions... even if the numbers are right, how you feel about your position is often influenced by a variety of factors. Many people who go into the markets react based on how they feel, and so maybe it isn't a good choice to them. But I'm not a gambler. (If I was, I'd play poker more for higher stakes-- I love it-- and even that's a game of skill... or I'd have at least gambled in some of my many trips to las vegas. I love las vegas, but have never gambled there[1]. I think common stock is one way for people to have a better life, with not that much effort, and not even that much discipline. I think the financial industry makes all its money by convincing people that its too difficult and that it would just be easier to hand it over to them.... [1] I have on several occasions fed $1-$2 into a slot machine, and gotten several alcoholic drinks from the cocktail waitresses, who I tend to tip well. I'm not counting theses in my losses because the value of the drinks exceeds what I "lost", and even if I did the total is probably around $20 or so. On another occasion my partner put $1 into a penny slot machine, but on the 20th pull, won $30 and immediately cashed out. That same occasion I spent a dollar on video poker, was up to $5, down to $0.50, got back up to exactly $1 and cashed out. Most of the $5 is the $0.25 I traditionally lose when traveling thru the Las Vegeas airport where I do a single slot pull each time.