You Have To Sell

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Buy low and sell high.

It's one of the principles of successful investing. Everyone knows this, so much so that I think there's probably not a soul alive who is not aware of it.

And since everyone knows about it, everyone should be making money from their investments and everyone should be rich and happy! However, we all know that is hardly the case. Instead of making money from their investments, a lot of people lost money. In fact, some people never even made a single cent. In other words, they lose, lose and lose every time they invest their money. This is despite them knowing the buying low and selling high principle.

Although there are many reasons why this happens - a one-sentence answer is not going to explain the whole situation - one of the more likely answer is that although they know about buying low and selling high, they do not actually practice it. In other words, they know but they do not do!

Take for example, property investment. Most of the people who bought properties in past couple of years would have made handsome gains as prices shot up significantly in that time. So they bought at a low price.

Many industry observers are saying that there are pockets of bubble in Malaysia today. In short, prices are not only high but nose-bleedingly high in some areas!

Based on the principle of buying low and selling high, a lot of people would be selling or at least trying to sell their properties today. By doing so, they would be capitalizing on the current high price and therefore applying the time-tested principle.

However, the reality is that few are selling.

One cannot help but ask the obvious question: "Why not?"

One reason is because they believe, or rather, hope that prices will climb even higher in the coming days. Yes, they make money if they sell today. But the thought of making even more money tomorrow is too bewitching to ignore. And yes, the thought that they would lose out on the future profits if they sell out now is just too much for some people. So while they know prices are high today but they hold on, hoping that prices will continue to rise and rise and rise. A few do realize that prices do not reach the sky but they too are holding on to their properties still, hoping to sell right at the top, make the maximum profit and therefore looking so smart in the process. Of course, the fact that no one can tell of a market top (before the event) is conveniently disregarded as unimportant!

Yes, prices do get whack out of synch from time to time. It does defy history, common sense, economic sense and even gravity for a short period. However, in the end, it will come down to economic sense. And when it comes to properties, economic sense is what the average Malaysians earn. After all, how can the average Malaysian who earns $5,000 or less in a month afford to buy a double-storey link house in the Klang Valley costing $800,000? Even if he is willing to eat Maggi mee for the next three years, he will still find it hard to afford such properties. This means that in time, prices will have to reflect the wages of the people.

I used to be guilty of this myself before - waiting and waiting and waiting. Exactly what I was waiting for, I cannot say. Perhaps for higher prices, perhaps to maximize my gains, perhaps because I saw everyone else was waiting as well and perhaps because I didn't know any better. Often time, as a result of all this waiting, instead of making money, I actually lost money because prices soon fell instead of going higher. Of course, at that time, like most people who lost money as a result of playing the waiting game, I was kicking myself while saying "I should have sold."

I have since learnt that (a) 'should have' doesn't count, and (b) this strategy of eternal waiting is a losing game. It is no way to make money. So I changed the strategy and actually adopted the buying low and selling high principle. Yes, I bought low like most people. But unlike them, I actually sold when prices were high - or least when I believed that prices were high compared to history, common sense and economic sense. Of course, I did not maximize my profits - that's the price I paid for selling too early - but the main thing is that I made money from my investments. And that cannot be a bad thing! And oh ya, until you actually sell your properties, the profits are just on paper; nice to look at, good for the ego but it can disappear in a flash.

Azizi Ali is Malaysia's premier writer, speaker and coach on money matters. He is a Chartered Financial Consultant (ChFC) and holds an MBA from University of Bath, UK.

Log on to http://www.beahappymillionaire.com to find out more about Azizi and how he can help you lead happier prosperous lives.

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Opportunities To You