Normal Stock Guidance Doesn’t Apply
Extreme Conditions May Distort Normal Market Evaluations
By Ken Little, About.com
In a normal market, I would (and have) advised that investors look for bargains in stocks that have fallen into the value category.
A value stock is one that has been under-priced by the market. Value investors look for these stocks and buy them at a discount to their intrinsic value.
When the market corrects the price of the stock - meaning others have discovered this under-priced gem and are buying the shares - the value investor pockets a nice profit.
One of the keys to this strategy is the phrase “normal market.”
The market of late is anything but normal, in case you hadn’t noticed.
If you are confused about what to do in this market, don’t feel like you’re alone.
Experts are confused and frustrated by market conditions that don’t fit the typical models.
With large swings from low to high and back again, the long-term investor may be better off doing nothing.
If you are invested in good companies, you are probably better off sitting tight and waiting for the current crisis to work its way out.
This is not a rule, but a suggestion. If you are so concerned about your investments that you can’t sleep, then take whatever steps you need to protect you mental and emotional health.
No one can tell you with certainty what is the proper course of action.
Normal markets will return one day, but there is no way to know how long that will take.
In the meantime, if you spot a good buy in a stock, consider whether you are willing to hold it through more turbulent times that are surely to come.
http://stocks.about.com/od/evaluatingstocks/a/092208Marrisk.htm
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
No comments:
Post a Comment