Perspective on buying stocks

Tuesday, March 13, 2018|Investing for the Long Run|
  • Perspective On Buying Stocks


Many are petrified when it’s time to buy a stock.

My View:

Revisit the valid reasons to buy without regrets.


Apply buying strategy uniformly to the portfolio.

“I paint objects as I think them, not as I see them.”
–Pablo Picasso

It is relatively easy to buy stocks, whether you’re a novice or seasoned investor. However, the decision is often full of fears and concerns. Perhaps, these questions ring some bells:

What if the investment does not go up after I buy? Should I hold off buying just a while longer? Will a turnaround be in the cards? Am I making the right moves?

Formulating your total buying strategy is well worth the effort.”

Buying is an intimidating and scary exercise for many. However, there is no need to suffer anguish and anxiety. Formulating your total buying strategy is well worth the effort. Purchases are influenced by market conditions and personal circumstances. Of course, always remind yourself that there is a buyer and a seller for every trade. So only half of you agree on the approach being taken.

This is a topic of discussion that advisers can have with clients. It develops sound personal strategy that addresses the many concerns of buying. Emotions can stop investors in their tracks when it comes to buying. Logic goes into short supply. It’s like being a deer frozen in headlights.

Reasons to buy
Let’s try to take the scary fears out of buying. The process is both an art and a science, so I will only scratch the surface. Here are some valid reasons for buying:

  • Investing fundamentals have changed.
  • Valuation has become attractive.
  • You anticipate profits in the long haul.
  • Some portfolio rebalancing is beneficial.
  • Management changes have taken place.
  • You don’t need the cash for a long time.
  • Asset mix targets changed in your road map.
  • You pursue some contrarian strategy.

A smart move is to decide and set out your buying strategy “before” you buy. You will encounter the least emotional attachment and make better decisions. Buying for valid reasons takes the scary out of the decisions. Look upon buying as a normal portfolio function, not an exercise full of fears and trepidations.

You may not need to buy the entire position at once. Systemic purchases over time typically reduce investing risks. Make your best decision based on what is most fitting for your nest egg. No looking back in your rear view mirror. No regrets please.

Buying pointers
I summarize some buying pointers. Stocks are mainly about earnings and guidance, so they rise when earnings outlook rise or their industry prospects improve.

Start with companies whose business you understand. Buy leading companies whose products are in demand. Look for stocks with rising dividend income. Focus on investment quality and broad diversification.

I expect stock markets to remain volatile. My preferred approach is to decide what to buy in total. Then proceed to systematically buy, say in 2 to 4 lumps, over 6 to 12 months. Another method is to invest a similar dollar amount every month, both in rising and falling markets.

Try to limit any one stock to 5%, or less, of the portfolio. Also learn not to chase the selections. Sometimes good stocks just get beaten up. Then some savvy investors shop for bargains.

Stocks can be ripe for buying at any time. Markets can change quickly, so don’t wait for the perfect storms. Buy selections that fit the investing goals you are trying to achieve. As my blog’s tag line reads, “Managing portfolios for the long run”. I am not a day trader, so I am prepared to hold a long time and rebalance as needed.

There is one ‘must do.’ That is, come to grips with the harsh reality that you will be wrong on some selections. It’s best to accept the facts and move along. This is one good reason not to get attached to your picks. The critical mission is not whether you sustain a loss, rather for how long.

About Adrian Mastracci, Discretionary Portfolio Manager, B.E.E., MBA  My expertise in the investment and financial advisory profession began in 1972. I graduated with the Bachelor of Electrical Engineering from General Motors Institute in 1971. I then attended the University of British Columbia, graduating with the MBA in 1972. I have attained the “Discretionary Portfolio Manager” professional designation. I am committed to offering clients the highest standard of personal service by providing prompt, courteous and professional attention. My advice is objective, unbiased and without conflicts of interest. I’m part of a team that delivers comprehensive services and best value in managing client wealth.

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