Buy Low, Sell High

The most important part of this concept is to make sure that there is a profit. How many Internet businesses were able to do that? How many people who invested in these companies were able to understand this principle? How can you apply this concept to make sure you make a profit?

Many of us get this simple formula backwards. Take the typical tag sale. We buy high (retail) and a few years later have a yard sale (sell low). We spend a weekend putting up signs, lugging all of this "treasure" from our basements and garage, and sit on our lawn watching cars go by. Then we move all the unsold stuff back or leave it by the side of the road for trash pick up. Does this seem like the road to fortune for you?

Buy high, sell higher is a variation that works, although is does carry higher risk. This is aptly named "the greater fool theory" because you assume a greater fool (than you) will come along and pay more for what you bought. Neat trick when you can do it: whether rummage, houses, or stocks. Just make sure you have a seat when the music stops, or you will be regarded as the fool.

You can't get hurt too badly jumping out of a basement window. You limit your risk when you invest little of your capital. Profits, as they are realized, can be scaled up into your growing business. Keep trying until you find the right formula.

Apply This Concept

Identify a service or product that makes sense for you to sell, utilizing the concepts discussed in this site. Make your mistakes on paper first. Try to calculate your expenses and expected income. Make sure there is a sufficient profit to be gained. If not, move on and keep looking.