Buy High, Sell Low: A Reverse Investment Strategy?

Is it truly a strategy?
You’ve likely heard it a hundred times—"buy low, sell high." It’s the golden rule of investing, the mantra that every financial advisor, from Wall Street to Reddit, preaches to new investors. But here’s where things get interesting: what if you did the exact opposite? What if you bought high and sold low? Sounds absurd, right? Yet, if you’ve spent any time on Reddit’s investing subreddits, you’ll know it’s a meme, a joke, but it has a deeper truth hidden in its irony. So why do people do it? Why are there countless stories of retail investors buying at the peak and selling in a panic when prices crash?

The psychology of the crowd.
Let’s explore how buying high and selling low happens far more often than people admit. It’s human nature. When the market is rising, the fear of missing out (FOMO) kicks in. It’s almost impossible to resist the urge to buy in at the top, even though logic tells you otherwise. But here's the trick: the crowd is often wrong, and the market, driven by irrational sentiment, rarely does what’s expected. You buy high, you sell low—not because you want to, but because your emotions trap you.

Reddit's role in feeding the frenzy.
Enter Reddit, a platform known for its grassroots discussions and, in recent years, for triggering monumental market movements. If we look at subreddits like r/wallstreetbets, we see a perfect storm of uninformed excitement and risky bets. These communities thrive on hype, and unfortunately, this can lead to investors jumping in at the peak of speculative bubbles. It’s not that people on Reddit lack insight; it’s more that the excitement builds to a point where people lose track of fundamentals. The allure of a quick buck clouds judgment.

When buying high and selling low goes wrong.
Take GameStop as a prime example. In January 2021, the stock’s price skyrocketed due to a massive short squeeze initiated by retail investors on Reddit. People saw the stock soaring from $20 to $300 in a matter of days, and panic buying ensued. But for every winner who sold at the top, there were countless others who bought at $300, thinking the sky was the limit, only to sell in despair as the stock dropped back down. This is the classic “buy high, sell low” scenario that seems to play out in every major bubble. And the worst part? Those who fall into this trap often blame external forces—the "hedge funds" or "market manipulation"—rather than reflecting on their emotional response to the market.

Lessons learned or forgotten?
Here’s the crux of it: we can laugh at the meme, but deep down, it represents a pattern that repeats itself in every bull and bear market. Investors—particularly new ones—fail to learn the lessons from past crashes. The same mistakes are made over and over because the market isn’t just about numbers; it’s about psychology. Rational behavior is often overshadowed by fear, greed, and the need for instant gratification. When Reddit amplifies these emotions, the cycle continues.

How to avoid buying high and selling low.
If you’re serious about avoiding this trap, there are ways to train your mind to think differently. First, focus on long-term value rather than short-term price movements. If you’re buying because the price is skyrocketing, you’re likely setting yourself up for failure. Instead, analyze the underlying fundamentals of the asset you're investing in. Does it have real value, or is it just riding a hype wave? Secondly, have a plan. One of the biggest reasons people sell low is because they lack a clear exit strategy. Know when you’re going to sell before you buy. If you’re holding an asset just because the price keeps going up, you’re not investing—you’re gambling.

Why "buy high, sell low" memes persist.
The meme exists because it reflects a universal truth about human behavior. People make emotional decisions in the market. And while it’s easy to laugh at the absurdity of it, the reality is, it happens far more often than it should. The meme isn’t just a joke—it’s a warning. The fact that it thrives on Reddit, a platform known for speculative trading, shows that even those who understand the concept can still fall prey to it.

Data to back it up?
Let’s break down some numbers. According to a study conducted by DALBAR, an independent research firm, the average equity fund investor underperforms the market by a significant margin. From 1990 to 2020, the S&P 500 returned an average of 10.7% annually, but the average investor earned only 5.6%. Why? Because of bad timing—buying high and selling low.

Year	S&P 500 Return (%)	Average Investor Return (%)
1990	3.1	1.5
2000	-9.1	-11.5
2010	12.8	8.7
2020	18.4	13.2

The takeaway.
In the end, the "buy high, sell low" joke might seem like just a silly meme circulating on Reddit, but it holds a deeper truth about the pitfalls of emotional investing. It's a reminder that the greatest enemy in investing isn’t the market—it’s you.