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May 2007

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Biggest Beginning Mistake in Investing

May 30, 2007 – Comments (5)

One of the most annoying things that I often hear about stocks is... "O... well this company is gonna do great, I love their product!" And then they go buy it... Or I hear something similar as a "CAPS" pitch, not coincidentally buy a very low-rated player. People must think of stocks in a different way. Every time you buy a stock, there is someone on the other hand who is selling it. You are basically saying, I know more than you about the companys future. If you just say "O, well this is going to do great, I love their product" Well, the person selling that probably knows just as much (and more) about the company than you do. The question is, "Is the excitement/future profitability already factored into the stock price?" That is why one should VALUE companies by making future price targetsin my point of view, for if you just buy companies hoping they will do well, then you are merely a speculator, and not an investor. Now, there is certainly something to be said about buying great companies, but I would rather buy great companies... AT GREAT PRICES... than just buy great companies and hope they do well, for many times people are TOO excited about a stock and it is grossly overvalued, even if it is a great company. If you want to know how I value stocks, send me a post, and I will try to explain it.  [more]

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