What is the point in paying a premium for stocks when market sentiment is high?

by ajstarks

I feel like I’m missing something in the basics of understanding investing. When stocks are priced high, what is the point in buying them? Isn’t the thought always to buy low and sell high? To me, low is when General Electric was $ 6 and high is what Apple or Google sell for now. You can say that Apple or Google may still go up, but to me the risk does not outweigh the gain. I just don’t know why public would pay a premium price for stocks.

Answer by Ria
public get caught up in hystreria – best to go the opposite.

it is called Contraian investing

Answer by MVD34
They have a different investing way of life than you do. Its that simple.

Answer by Bill Q
History has shown that a lot of time, when the stock market has appeared too high, it has proceeded to go even higher. For instance in 1995, then marked seemed dreadfully high, but it proceeded to go a lot higher. It is hard to time the market and know when to get in and out. Look at the chart of the Dow below

Answer by Stock Trading Warrior
Highs and lows are as they pertain to individual stocks themselves, not GM at $ 6 or AAPL at $ 270. When AAPL was at $ 50 public probably thought it was high. Fundamentals can give you an thought if a stock is overvalued or not. The conundrum is even overvalued stocks can rise because buyer sentiment is bullish.

The conundrum with buying low and selling high is, how do you know a stock is at it’s bottom? You may maybe buy a stock that you reckon is at it’s low, but it continues to fall draining your cash away or even sit in a range for years wasting time.

And you’re right, you probably don’t want to buy a stock at an price exhaustion point. So the trick is to be able to know price patterns. One of persons patterns is called a breakout where price breaks out of a range. After that, some upward momentum may maybe occur and that can be a excellent time to buy an upward moving stock. So, it’s about price patterns at any price point.

Controlling risk is not really about price point, it’s about knowing how much of your portfolio to invest, when to sell stock, when to buy more, etc. all of which you can learn.

Answer by zuma
The few months it took Apple AAPL to sell 2 million I pads ,it no longer was an expensive stock..Then this winter look forward to the new I Phone…Cheap stock? Enron?..MCI Worldcom?…..BP?

Add your own answer in the comments!

On the finance site it says that microsoft is 29.35 x 100 and apple is 222.23 x 1000. what does that mean for the price of stock per share?
I messed up swap the “100″ with the “1000″

Answer by jhanford1
You’re looking at bid/question, not last trade which is the price referred to 99.9% of the time.

Answer by Doug
the “100″ and the “1000″ refers to size amount. what it mean is this:

$ 29.35 x 1000

that earnings somebody is willing to buy or sell 1000 shares at the price of $ 29.35 per share.

-Day Trader and Investor

What do you reckon? Answer below!
Malone's Liberty Media Offers Billion for Barnes & Noble
Barnes & Noble Inc., the bookstore chain that started exploring a possible sale last year, received an offer from John Malone's Liberty Media Corp. to buy the company for about $ 1 billion in cash.
Read more on BusinessWeek

The NASDAQ OMX Portfolio Administrator App for iPad allows users to build a portfolio and watch list using real-time stock price data for US, Nordic and Baltic stocks. The app includes a flashing price screen to highlight real time movements, a chart overlay to show technical analysis, and capabilities for record and tweet posting.