A friend of my saw me queuing up for a stock recently and asked: "Why you buy ah? Will it go up?"
At that moment, I realized something.
That's not really the question I asked when I buy a stock. As least, not the first nor most important question.
The
first question I ask is "What does this company do? Can it make money?
Will it go kaput? Can it keep paying me in bad times?"
Only after that do I ask, "Is this a good price to pay for it?"
Whether
it goes up or down right after I buy is not really on my mind. Of
course, we all wish we can "catch the bottom". However, with that comes
the risk of "missing the boat". It's a tug of war situation and there's
really no way out of it. I have been on both sides of it and both hurts a
lot.
For me, I stick with a price and go with it.
I guess that the fundamental difference.
Afternote:
Came across this article on Motley Fool which I felt really describes the core of long-term investing in layman terms.
If
I share this with my friend he will probably think that I am stupid, or
I am laughing at him (for losing $ recently). Perhaps they have gone
too deep to turn back.
When you used to make $30 every
month in dividends, and now you are punting $100K on a single stock.
When now you are making/losing $500 for every 1% movement of the stock.
When now the interest fee you occur each month is more than the
dividends you used to received for an entire year.
Do you think you can go back?
