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Have Realistic Expectations

January 9, 2013 2 Comments

wealthymatters Forget about buying a stock, a fund, or an index at the bottom or selling at the top. Yes, somebody does, but that elusive somebody will never be you. The truth is that after you buy a stock it will go lower — not sometimes, but always. And when you sell a stock, it will always go higher. It’s not bad luck or bad timing. It’s simply unrealistic to expect that, competing with thousands of other players, you’re going to be smart or lucky enough to get the very top or bottom tick.

If you know ahead of time that it’s going to go lower after you buy it, why not wait? The reason is because if you do and the stock goes lower, you’ll want to wait some more. But then, at some point, it’ll turn around and you’ll be left on the sidelines. The best you can do is to buy in a reasonable buying range, know that it’s going to tick lower after you buy it, but also know that you have a position in the stock and will benefit when it goes up. Don’t be disappointed when this happens. It happens to everybody. It’s part of the game.

Also worth remembering: In more cases than not, stocks go down faster than they go up. The likely reason for this, at least in part, is that the emotions that trigger selling are felt more intensely than those that motivate buying. It’s usually more urgent to get off the train than to get on.-Dick Davis

Filed under Paper Assets Tagged with Dick Davis, postaday, realistic espectations, stock investing

On Selling Stocks

January 9, 2013 Leave a comment

Perhaps the most difficult of market skills is knowing when to sell.

There is no one definitive answer, no formula that applies in all situations. To sell within a reasonable distance of the high is probably the best we can hope for, and even that is easier said than done. Since we already know that, invariably, stocks go higher after we sell, it makes sense not to sell all our shares at once. It doesn’t always work and it takes longer, but the odds favor a higher average price if sales are spread out. The most common mistake is selling winners too soon and holding on to losers too long.

Investors sell stocks for many different reasons. Here are some that make good sense: Read more of this post

Filed under Paper Assets, Tool Kit Tagged with postaday, stock investing, when to sell your stocks, when tp sell your mutual funds

Sir John Templeton’s Maxims

January 9, 2013 Leave a comment

wealthymatters 1.For all long-term investors, there is only one objective – “maximum total real return after taxes.”

2.Achieving a good record takes much study and work, and is a lot harder than most people think.

3.It is impossible to produce a superior performance unless you do something unless you do something different from the majority.

4.The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.

5.To put “Maxim 4″ in somewhat different terms, in the stock market the only way to get a bargain is to buy what most investors are selling.

6.To buy when others are despondently selling and to sell when others are greedily buying requires the greatest fortitude, even while offering the greatest reward.

7.Bear markets have always been temporary. Share prices turn upward from one to twelve months before the bottom of the business cycle.

8.If a particular industry or type of security becomes popular with investors, that popularity will always prove temporary and, when lost, won’t return for many years. Read more of this post