I like to review my guidelines at times like these (especially since I'm holding lots of INTC) to help me have the courage to do the right thing in the face of fear that has taken over the market. I think there is blood in the streets now. These are borrowed from others who have done well.
"How do all the legendary millionaires like Getty, Rockefeller, Carnegie, Soros, Buffet and Templeton approach investing? By following principles most people know -- but end up foolishly ignoring. They are....
"Buy When Everyone Else Is Selling"
"Buy When There Is Blood In The Streets"
"When The Man On The Street Is Buying, That's The Time To Sell"
"You have To Be Greedy When Everyone else Is Fearful"
"It's very common for a stock to fluctuate in price for no REAL reason. Usually, this "No REAL Reason" is caused by Market Conditions and/or Market Maker Manipulation.
People buy stocks for one reason, to make a PROFIT. People sell stocks for MANY MANY reasons, such as, selling a stock for a tax-loss or selling because you need the cash. There are also EMOTIONAL reasons why Investors will sell a stock, such as, lack of patience and/or the FEAR of losing even more money, if the stock price starts to decline.
To make money in the Stock Market, you must have the PATIENCE and the DISCIPLINE to buy a GOOD stock when Investors are selling, and sell that stock when Investors are buying.
MOST Investors buy and sell stocks based on their emotions. FEAR tells you NOT to buy a stock when it's dropping in price (or to sell a stock, if you already own it) and GREED tells you to buy the stock when it is moving up. The SMART Investor will take advantage of this EMOTIONAL buying and selling.
Averaging Down can be very profitable IF you do it with a GOOD Low Priced Stock that is already considered Under-Valued. Averaging Down can also be VERY RISKY, We would NEVER Average Down on a Financially Unstable Company and/or stocks priced above $3.00.
To Lower YOUR RISK When Averaging Down, You Should Follow These Important Rules:
1.) If the Stock Price declines 18-20% (or more) due to Market Conditions and NOT Negative News, you should consider Averaging Down.
2.) Do NOT Average Down more than 2 times.
3.) Do NOT Average Down on a stock when the Company is Losing Money
4.) Do not Average Down on stocks priced above $3.00
We don't like to Average Down more than 2 times, because we try very hard to find a bottom and if the price drops more than 40% from our first buy, we begin to wonder if there may be a problem we do not know about. Plus, we never like to put a lot of money into one stock." |
