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Buying A Stock On The Way Down Can Cause Big Losses.(B)(INVESTOR'S CORNER)
Byline: JONAH KERI
Every day, millions of investors get it wrong. Yet it's one of the simplest paths to success in investing: Buy on the way up, not the way down.
Through decades of market research, IBD has found the same patterns emerging again and again. Stocks that rise and outperform their peers tend to keep doing both. Stocks that fall and underperform tend to continue their losing ways.
Despite those tendencies, many traders inevitably try to buy on the way down. If a stock is a good buy at 50, they reason, it's a great buy at 40. If it drops to 25, even better.
If ever the danger of that tack was driven home, it was during the bear market of 2000-02. Former tech highfliers such as Oracle and Sun Microsystems sold off after peaking in 2000. They'd already nabbed monumental gains and would need months, if not years, to digest those gains and start anew -- if indeed they ever came back.
Instead, star-struck investors saw what they thought was a buying opportunity. They bought as those stocks started rolling over. As the stocks fell further, some folks threw more money at them, hoping to benefit from dollar-cost averaging.
No amount ...
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