Learn to invest with Buffett

Chapter 50

Chapter 8 Section 2 Seize the selling opportunity of the "peak" of the stock market
When people's worries about some big environmental events reach their peak, in fact, that's when we make deals.Fear is the enemy of the trend chaser, but the confidant of the fundamentalist financial analyst.

--Warren Buffett
The above passage from Buffett clearly explained that everyone in the stock market is chasing a high point, trying to sell their stocks at a good price, but often the inner fear always prevents them from selling stocks at a suitable price. It requires a certain amount of guts and insight, and people have inevitable fear. If investors can conduct a successful fundamental analysis of the stock market, it is not impossible to sell stocks at a peak period.

There is a saying in the stock market: if you can buy, you are an apprentice, if you can sell, you are a master. To keep the fruits of victory, you should choose the key timing to sell.Buffett, the stock god, has a kind of courage, and he is absolutely unambiguous when it is time to ship.

In the early morning of October 1987, 10, the U.S. Secretary of the Treasury made a shocking statement on a national television program: If the Federal Republic of Germany does not lower interest rates to stimulate economic expansion, the United States will consider letting the dollar continue to fall.As a result, on the second day, Wall Street set off a storm that shocked the Western world: the Dow Jones Industrial Average Index on the New York Stock Exchange plummeted 18 points, and within 508 and a half hours, 6 billion US dollars of wealth disappeared! For three days, the dark headlines in various newspapers in the United States were overwhelming: "October Massacre", "Blood on Wall Street", "Black Monday", "Dow Jones Crash"... Wall Street shrouded in haze.At this time, Buffett started to act when investors were madly selling their holdings. He bought his favorite stocks at a very low price, and bought more than 5000 billion US dollars of "Coca-Cola" at an ideal price.Soon, the stock rose, and Buffett saw the opportunity to sell the stock in his hand, making a huge profit.Buffett is always able to seize the opportunity to sell his stocks at critical moments.

In fact, any successful investment strategy must grasp a clear "throwing opportunity".Everyone wants to sell their stocks at a good price, and everyone is looking for the highest point of selling stocks-the crest.However, not everyone can do so.In this regard, Buffett believes that it is actually very simple to seize the opportunity to sell at the "peak" of the stock market. In practice, he operates like this:
The first step is to identify the peaks and troughs of the stock market.The trend of the stock market advances in waves, just like the waves of the sea, the trend of the market and individual stocks also has a bottom and a top.Therefore, you need to find these two points.Of course, if you can analyze accurately and find the exact top or bottom point, that's the best.But it is impossible for most people to do this most of the time, and even Buffett is not sure about it.So he always thinks that he may not be able to find the extreme point, and he doesn't need to find it, as long as he is at the second highest point or the second lowest point.And these two points can be grasped by ordinary people.

The second step is to conduct further rational analysis.Generally, when the market and individual stocks have a large increase in a period of time, even if there is no policy intervention or other major negatives, technical adjustments are still necessary.Generally speaking, the greater the increase, the greater the adjustment.When the market and individual stocks rise to the top, selling stocks in time can avoid the risk of the market and individual stocks peaking and callback; and when the market and individual stocks are fully adjusted and enter the market, the risk is also reduced.

The third step is to enter the market when the time is right.After the above analysis, we can see that investors can easily choose cheap and good goods if they buy when the business hall is very deserted; while when the business hall is crowded, although the market is booming and people are rushing to buy, they will rush to buy. You must make a decisive move, so that you can not only sell for a good price, but also avoid the risk of being overwhelmed by the cold.

The reasoning is simple and easy to understand, but in practice, investors may not be able to operate step by step and pay attention to everything.Therefore, investors must maintain a certain sensitivity to the stock market and have their own objective analysis before making a decision.
Investment motto:

There must be a clear "throwing time" in any successful investment strategy.Everyone is looking for a good time to sell their stock, that is, a peak.

(End of this chapter)