BUYING STOCKS
The market decline has provided some opportunities. Now, it's time to talk about buying. I have recommended First Marblehead (FMD) in a previous post and Starbucks (SBUX) is also getting into a much more comfortable buying range.
Side note: On Starbucks, note that domestic growth is slowing and the market is somewhat saturated, so seek to buy at the lower end of the $20-$25 buy range or even lower (read my previous post on Starbucks). If you don't want to wait, this post also helps you.
The question now becomes how do we get in?
I would advise against buying all your positions in one trade. A stock, even when it's a good investment, can continue to decline and the farther down it goes, the deeper the hole you're in. Don't be overconfident in the price of a stock. Be confident in your research and the value of the company and the fact that you have given yourself a good margin of error and that the company is a solid performer with good managers.
Losing on a new investment may not mean much in the long term, but in the short term, it is bad for you psychologically as an investor. Nobody likes losing money and the pain of a lose is much harder on the mind, compared with your ability to maintain a long term perspective. That gets better with time.
So do not pile in at once. Buy some and wait. If it goes up, you are making money, if it goes down, you get to buy more of a great company at a better price. At worse, it goes up so much and you have to find a new place for your cash. Not a bad problem to have, considering the alternative may have been you losing money.
Also, if you understand charts (this post is not going to cover that), now is the time to start looking at them: moving averages, MACD, Stochastic, volumes etc to know when the big money is getting back in. Remember, I only recommend such technical analysis after your buy price has been reached. It can help alleviate the risk of watching your purchase going down.
All the same, you don't need to worry if you don't know about charts, just make sure you ladder your buys.
One more thing. Don't let your commissions become a burden. Commissions put you in the hole off the bat. It makes no sense to spend $7 to buy $100 worth of share. You'll already be in the hole for 7%. Limit commission costs to as little as possible, preferably less than 2%.
And then stop fretting about the gyrations of the market. It's time to focus long term and simply follow the company's fundamentals, not stock price. Sometimes it may lead you to sell, but not usually if you've done the proper work upfront.
The market decline has provided some opportunities. Now, it's time to talk about buying. I have recommended First Marblehead (FMD) in a previous post and Starbucks (SBUX) is also getting into a much more comfortable buying range.
Side note: On Starbucks, note that domestic growth is slowing and the market is somewhat saturated, so seek to buy at the lower end of the $20-$25 buy range or even lower (read my previous post on Starbucks). If you don't want to wait, this post also helps you.
The question now becomes how do we get in?
I would advise against buying all your positions in one trade. A stock, even when it's a good investment, can continue to decline and the farther down it goes, the deeper the hole you're in. Don't be overconfident in the price of a stock. Be confident in your research and the value of the company and the fact that you have given yourself a good margin of error and that the company is a solid performer with good managers.
Losing on a new investment may not mean much in the long term, but in the short term, it is bad for you psychologically as an investor. Nobody likes losing money and the pain of a lose is much harder on the mind, compared with your ability to maintain a long term perspective. That gets better with time.
So do not pile in at once. Buy some and wait. If it goes up, you are making money, if it goes down, you get to buy more of a great company at a better price. At worse, it goes up so much and you have to find a new place for your cash. Not a bad problem to have, considering the alternative may have been you losing money.
Also, if you understand charts (this post is not going to cover that), now is the time to start looking at them: moving averages, MACD, Stochastic, volumes etc to know when the big money is getting back in. Remember, I only recommend such technical analysis after your buy price has been reached. It can help alleviate the risk of watching your purchase going down.
All the same, you don't need to worry if you don't know about charts, just make sure you ladder your buys.
One more thing. Don't let your commissions become a burden. Commissions put you in the hole off the bat. It makes no sense to spend $7 to buy $100 worth of share. You'll already be in the hole for 7%. Limit commission costs to as little as possible, preferably less than 2%.
And then stop fretting about the gyrations of the market. It's time to focus long term and simply follow the company's fundamentals, not stock price. Sometimes it may lead you to sell, but not usually if you've done the proper work upfront.
posted by Shegun at
4:56 PM
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