Chapter

7

When to Buy or Sell

In This Chapter

For the long-term investor there are only three important stock prices: the fair market price, the price they pay, and the price they sell. All other price movement by a stock is really not relevant and may confuse or frighten an investor into making a hasty decision. You should never buy a stock without a plan to sell the stock. When you work from a plan, you are less likely to be distracted by market news that is only relevant to stock prices for a few days. If you have a plan, you’re less likely to sell during a downturn or buy during an upturn. Although it may seem overly simple, if you buy at the right price and sell at the right price you will make money investing in stocks. It’s as simple as that. However, nothing is ever very simple where money is involved. The stock market is notorious for letting emotions drive stock prices in crazy directions. Long-term investors hope the stocks they buy will grow and add value year after year. However, things change and companies either adapt or they cease being great companies and you must reconsider your ownership. Because the future is unknown, the best you can do is identify great companies you want to own, find a price that fairly represents the company’s value, and hope for an opportunity to buy below that price. In the end, investing in stocks for the long-term is hoping for the best and preparing for the worst.