If you can correctly identify “low” and a type of a “low” then of course it is a good idea to always buy a low. But how do you know that a “low” in a certain stock is due to bad performance of a company going bankrupt or due to overall market conditions? And how do you know when a “low” is truly a “low” and that the stock will not go even lower?
Investing in stocks is not about chasing lows. Choose high quality stocks and invest in them regularly regardless of the price being low or lower. For example, you can pick a stock and keep buying every time the stock goes below your original purchase price or cost basis. Although even this strategy may not be a good one either as you can buy a stock which will rally and never visits your original purchase price ever. By waiting for a “low” you will miss a great stock going up entirely. Check JNJ stock for example. When I bought it in 2009 it was at $38 a share. The stock never visited this price ever and probably never will. Today, it trades for $150 a share. Or Mastercard (MA), I bought for $78 a share, today it is at $300 a share and that price will never be reached again.
You can also calculate intrinsic values and all sorts of valuation calculations to determine when the stock is “undervalued” and vice versa. But, in my opinion, it is too much work with too much subjective estimates and guesses. So, I do not do it.
So, pick a few stocks and start accumulating no matter what the price is doing. Over time of 20 years, the stock will be up (unless you pick some high flying questionable and speculative company.
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