Its not that investors start out to do that, but too often, they use price, and in particular price movement, as their only signal to buy or sell.
Stocks that have gone up recently, especially those with a lot of press, often attract even more buyers. This obviously drives the price up even higher.
People get excited about what they read and see and want a part of the action. They jump into a stock that is already trading at a premium they buy high.
TradersExperienced traders can make money jumping in and out of a stock thats caught the publics attention, but its not a game for the inexperienced and its not investing.
Theres risk involved and tax consequences along with other issues that mean most investors should leave this activity to short-term traders.
For most investors, trying to grab a piece of the latest flashy stock, usually means paying too much (buying high).
Bad DecisionThe other side of the market is when a stock has fallen; most investors may want to sell along with the rest of the market. If you go by price alone, this can be a bad decision (sell low).
There are many reasons a stocks price drops and some of them have nothing to do with the soundness of the investment. Thats why if you only follow price you may miss an opportunity.
After a stocks price has fallen can be a great time to buy (buy low) if you have done your research on the company.