Worrying too much about the wrong things, like unpredictable stock market events, takes a toll on results and diminishes an investor’s intelligence
Many investors spend a lot of time worrying about the wrong things. In particular, they worry about things that are unpredictable. Even if they happen, these things may have only an indirect impact on their long-term profits. As a result, they have little time to pay attention to things that have a direct impact on the value of their investments.
At times they may mull over every tidbit of economic information that comes out, and how it differs from its predecessor of a week or a month earlier. This type of investors’ intelligence looks to detect a pattern—a sign that the economy is mending and headed for a return to steady growth, say, or perhaps deteriorating and doomed to plunge into a new recession. Others look for patterns or omens in domestic or international politics, or in demographic data, or in the price of gold.
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These investors often feel they can cut their investment risk by selling some or all of their stocks in times of high risk, and buying them back when risk is low. This never works well for long. After all, risk as portrayed in the media, and genuine market risk, are two different things. No matter how you try, it’s hard to pinpoint market turning points, if only because you have to outguess so many other smart people who are trying to do the same thing.
You’ll rarely if ever sell near the top, or buy back near the bottom. If you could do that with any consistency, you’d “make all the money in the world,” as the saying goes.
If you constantly worry about the “big picture,” you may at times manage to sell at just the right moment to sidestep a serious downturn. But you may only do that after sitting through a series of downturns. The downturn you avoid may turn out to be the last in a series—the “final leg downward”, as short-term traders like to refer to it.
A true display of an investor’s intelligence comes in knowing when to buy, when to hold, and when to sell
It is easier to hold high-quality stocks that perform well over time. But we don’t recommend that you hold indefinitely.
We advise selling particular stocks when we feel the situation has changed and they no longer qualify as high-quality investments. We also sell if we decide that a stock isn’t as high-quality or well-established as it needs to be to cope with the challenges it faces. Of course, many of our sales are due to a successful takeover of a company’s stock, which generally results in a major profit.
In short, our strategy is “buy and watch closely.”
Of course, there are a variety of ways to build an investment portfolio. Some work better than others. Our Successful Investor approach has done well for our clients and readers over the past few decades.
There’s no easy answer to a buy-now-or-wait dilemma. At times it may pay to hold off — for instance, a company’s stock will often rise when it announces a stock split, then fall after the split takes effect.
In the end, our stock buying advice is that if a stock is truly worth investing in, you should be willing to buy it at current prices.
Investors’ intelligence: Why smart investors look for hidden assets
One of the sweetest and most profitable pleasures of successful investing is to buy high-quality “value stocks” (or stocks that are reasonably priced, if not cheap, in relation to sales, earnings or assets).
Hidden assets are valuable assets that investors overlook, discount or disregard altogether. They have special appeal for companies that are using takeovers to grow. They can be found in real estate, research spending and in brand names and so on.
If you buy a stock for its hidden assets, but those assets stay hidden or ignored by investors— or turn out to be less valuable than you thought—it can’t hurt you much. The best hidden assets will eventually expand a company’s profit, grab investor attention, and push up its stock price.
You should always look for hidden assets when evaluating a stock. Stocks with hidden assets are not rare, but they’re hard to find. These three financial ratios can be used as a guide to further evaluating stocks with hidden assets once you have found them: price-earnings ratios, price-to-book-value ratios, and price-cash flow ratios.
Investors’ intelligence: Undervalued stocks are worthy investments
There are numerous reasons as to why a value stock is underappreciated and inexpensive. The company could have experienced a stagnant (or even depreciating) period, which is why they fall into the category of “value stock.” Their business could have experienced temporarily lower sales than they had in the past because of bad publicity, legal issues, or simply lagging behind competitors.
A value stock could go through a turning point where most investors ignore it, but savvy investors see that there is also a great potential for it to bounce back and make a bigger impact in the market.
An investor’s intelligence about the market often comes with experience. What mistakes did you make as a beginning investor that you would never make now?
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We do not collect or disclose personal information, except when it is provided to us voluntarily by the site/store visitor with their consent.
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What personal information do we collect?
The information we receive from customers helps us personalize and continually improve your online experience at TSI Network. TSI Network may collect personal information online for all legal purposes, which include, but are not limited to:
Information You Give Us: We receive and store any information you enter on our website or give us in any other way through sign-up forms or ordering forms for publications and services. You can choose not to provide certain information, but then you might not be able to take advantage of many of our services and features. We use the information that you provide for such purposes as responding to your requests, customizing your web browsing experience for you, improving our website, and communicating with you.
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Does TSI Network Use the Information It Receives?
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Except as provided herein, TSI Network will not sell or rent personal information about you to unaffiliated third parties.
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TSI Network does everything possible to prevent unauthorized intrusion to its websites and the alteration, acquisition or misuse of personal information by unauthorized persons. Notably passwords submitted by users of our websites are encrypted using encryption mechanisms. However, TSI Network cautions visitors to its websites that no network, including the Internet, is entirely secure. Accordingly, we cannot be responsible for loss, corruption or unauthorized acquisition of personal information provided to our websites, or for any damages resulting from such loss, corruption or unauthorized acquisition.
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Changes to this Policy
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TSI Network may revise this Policy from time to time.
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The contents of this web site and our publications are based upon sources of information believed to be reliable, but no warranty or representation, expressed or implied, is given as to their accuracy or completeness. Any opinion reflects the Successful Investor’s judgment at the date of publication and neither the Successful Investor, nor any of its affiliated companies, nor any of their officers, directors or employees, accepts any responsibility in respect of the information or recommendations contained in the publications or on this web site. Moreover, the information or recommendations are subject to change without notice.
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