Lies we have told you so far … (Quick tip)
For the past two months and eight articles, we have been preaching the same fundamental actions: Buy solid stocks, keep costs low, avoid brokers & administrators, hold your stocks long term and ignore stock news.
But as one of our genius friends always says, “There is an exception that makes the rule.” He must be a genius, because that axiom doesn’t make any sense to us.
Here is the exception: Read stock news, on losers — because the bigger the loss, the greater the potential recovery. So, every once and a while, Google something like, “Prices fall”, “Stock slips” or “investors are selling”, and note the names of companies on that list. Here are three current examples: Caterpillar; JCPenney; Apple;
However, don’t actually read the article! You are trying to get ideas on companies with a sale price, not over think it. Why this is true: here.
Bonus quick tip!
So, now your thinking, “These people are asking me to put my money into the least safe place I could put it! I’m going to lose all of my money!”
Well, maybe yes and maybe no. You want to be sure about your money? Put it in a savings account. That is as close to a sure thing as is possible in this life — too bad the sure thing is that it will lose ground on inflation.
We live in a world of volatility. The question is not if a company experiences volatility in it’s price/business, but, is this volatility based on real or perceived problems.
There are a lot of reasons there can be a loss in the price of a company: Pending legal action/outcomes, income loss, change in management, market loss, change in strategy/product/the color of the VPs tie, opinions, economic astrology, etc.
Where there are many reasons for a price loss, there are only two categories: Real and perceived.
Remember, the market is run by people that a) panic b) follow the panic-ers and c) people that take advantage of all the panic. The thought process of each of these people can be very, very complex, but the results in aggregate are fairly easy to understand: if there is bad news, the price goes down; if there is good news, the price goes up.
This is where you’re BS detector comes in, and a little common sense. Also, the slightest hint of research … but just a pinch! Just enough to answer this: Is the price low because the product sucks or because the press sucks?
NOTE: StockGuilt is a blog about interesting stocks, and our views. We are not stock brokers, investment councilors, planners or legal advisers. In fact, at least one of us is an idiot. The rest are just folks who think about investments. This is what we think, and what we will do/did. In no way are we telling your what to buy or sell … Do your own homework.
Posted on 03/20/2013, in Quick Tips and tagged Children's future, DIY, Guilt, investing, Investments, Personal Finance, Personal Investing, Retirement, Stocks. Bookmark the permalink. Leave a comment.