Investor Toolkit: Successful investors don’t chase the share price

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Every Wednesday, we publish our “Investor Toolkit” series on TSI Network. Whether you’re a beginning or experienced investor, these weekly updates are designed to give you specific investment advice. Each Investor Toolkit update gives you a fundamental piece of stock market advice, and shows you how you can put it into practice right away.

Today’s tip: “The value and quality of the stocks you consider are far more important than what the share price happens to be doing at any given moment.”

Stocks go up and down every day. Sometimes there is an obvious cause in good or bad news. But there’s a large random element to stock price changes, particularly over short periods.

Here are two of the most common investment errors:

  1. Becoming more “bullish” or optimistic because stock prices have gone up. Some investors only feel safe buying stocks or mutual funds after prices have risen. This is opposite to the way you make most purchases (cars, clothing, etc.) Ordinarily, it’s better to buy when prices go down, not up.
  2. Becoming more “bearish” or pessimistic because stock prices have gone down. When other investors sell and drive prices down, you may wonder if they know something you don’t. However, random influences may be at work.

There are many ways to counteract these errors, but the following are five of the best:

Learn all you can about your investments. Read the quarterly and annual reports of companies or mutual funds you invest in. Ask your broker for research reports. Browse the internet (selectively, of course) for news and opinions on matters that may have an impact on your investments. (Above all, subscribe to and read newsletters from TSINetwork.ca!)

Beware of advisor failings. Some advisors are ‘permabears’ — perpetual pessimists. Others are blind to risk, so they recommend speculative stocks at outrageously high price levels.


Finding a financial advisor you can trust

Successful retirement planning begins with faith in your investment plans. Many investors say that finding an advisor they can trust is one of their biggest problems. Too often, they’ve had advisors who apply the wrong rules to their investments, frequently for reasons of self-interest.

Many of our portfolio clients tell us they chose us to manage their investments because they feel a deep sense of trust in our investment capabilities. But they also feel an extra sense of trust due to the way we set up the business, to eliminate conflicts of interest, which ensures that our clients get our unbiased recommendations with no fear of hidden costs. This sets us apart from most investment services: you can find out more without any obligation.

If you hire us to manage your investments, we tailor your portfolio to your own unique situation—your specific goals, your temperament, your financial situation. We work for your convenience, not ours.

You are in very secure hands. We have an outstanding team of experts. They contribute an enormous amount of time and research to our Successful Investor Wealth Management service. But I personally approve every transaction in every portfolio. If you’d like to know more, call us toll free at 1-888-292-0296, or drop us an email. Click here to learn more about Successful Investor portfolio management services.


Don’t try to buy at the bottom, or sell at the top

Take a broad view. Consider earnings, dividends and other factors in making investment decisions. They matter far more than short-term stock-price trends.

Invest consistently. Don’t try to buy at the bottom or sell at the top. (As Bernard Baruch said, “This can’t be done, except by liars.”) Pick out a selection of well-managed mutual funds and/or well-established companies, and invest gradually over a period of years. Plan to hold indefinitely. You can always change your mind and sell if fundamentals deteriorate or your needs change.

Invest in a portfolio. Recognize that some of your stocks are bound to disappoint you. But our three-part Successful Investor portfolio strategy can help you cut risk and profit over a period of years. Here’s how it works:

  1. Invest mainly in well-established, dividend-paying companies;
  2. Spread your money out across the five main economic sectors: Manufacturing, Resources, Consumer, Finance and Utilities;
  3. Avoid or downplay stocks in the broker/media limelight, where investor expectations are bloated and disappointing developments can spur stunning stock-price declines.

You’ll find that these practices will go a long way toward making you a successful investor.

Coming up Next

Tomorrow in U.S. Stock Picks we look at an energy firm that aims to profit by getting rid of risky and expensive projects.

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