What is meant by 'buying low and selling high' in investment terms?

'Buying low and selling high' is a fundamental principle in investing that refers to the strategy of purchasing assets, such as stocks or real estate, at a lower price and later selling them when their value increases. This approach aims to capitalize on price fluctuations in the market to generate profit.

The essence of this strategy lies in the understanding that markets often present opportunities where an asset can be bought at a price that is lower than its future potential value. Investors who effectively implement this strategy demonstrate patience and market insight, as they must identify the right time to make these transactions to maximize their returns.

Other options presented do not align with this core investment strategy. Focusing solely on high-risk stocks or bonds limits the investment horizon and does not guarantee the buy-low, sell-high approach. Trading based on market rumors can lead to unpredictable outcomes and does not rely on the analysis of actual market trends or valuations. Therefore, the second option accurately encapsulates the philosophy of buying low and selling high, making it the most suitable choice.