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Rule #1 - Do not lose money! Rule #2 - Never forget rule number 1! ( by: Warren Buffet )For comments or questions please email: : admin@equityresearch.com |
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Market FluctuationsThe best thing to do with a market fluctuation is to ignore it. If you are trying to time market fluctuations, then you are speculating; not investing. Market ForecastingMarket forecasting is difficult to do. People get it wrong all the time. Many analysts have conflicts of interest and are purposefully overly optimistic. If market forecasts were correct and published for the public there would be huge buying and selling rushes. During a buying rush, who is going to be selling? During a selling rush who is going to be buying? Here is a crucial point. Any trading practices out there will lose any competitive advantage once they gain popularity. Any trading that is simple and can be easily followed by the masses will lose any potential gains. Hence, following the crowd is not a good strategy. Buy Low and Sell HighEverybody has heard to buy low and sell high. On its face it makes so much sense. However, there is one problem here. The only way to buy low is to time the market correctly and vice versa to sell high. Past market fundamentals consistently change. It is too difficult for the average investor, or even professionals, to time the market. When you try to buy low and sell high, you are often buying when it is low, but not bottomed out and selling out before the real high is achieved. The worst reason to buy or sell stocks is because of a price increase or a price decrease. Securities should be bought and sold based on the company valuation. Companies that are shown to have a good value should be held. Companies that rise in price and are no longer a good value should be sold. Market CommunicationSuppose your friend is out there always telling you to buy or sell something. Let's say some of his ideas are good and some are bad, but he is persuasive in either case. Would you want to keep listening to your friends advice? Do you think you might take the bad advice some of the time? That is how the market is. It constantly feeds you with information and much of it is persuasive, but dead wrong. Do you want to keep listening to it? The best way to keep a clear head and your temperament under control is to avoid listening to the market. Focus on your own investment principles, valuations, and calculations. If you do this, you will make better decisions and be less subject to emotional investing. |
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