Sunday, December 7, 2008

Averaging the shares you are holding.

The advise always given is that the shares market is risky and its for the rich to play. When its having Financial Crisis, don't go into the shares market.

I somewhat disagreed with the statement, if you don't buy during Financial Crisis (all shares are at discounted price), then when can you buy? Some will advise during the bull, all price is at the high, so again, don't buy is the advise given. When is the right time to buy?

The best time to buy is when a company's shares price is at the bottom, but how will you know when is the bottom? I think even the experts will not be able to give u that answer.

If you have buy 10000 shares of ABC at $1.00, and later it dropped to $0.80. You should buy another 10000 shares again to average out the price to $0.90. If the price goes up back to $1.00, you can sell all the shares for profit, if it drop further, just wait for another to buy at a lower price. This example can be used when you have the amount of money to buy 30000 shares, so instate of buying 30000 shares at one go, you divided it into 3 buys. That is why when the prices dropped, you can still earn money when it go back to the original price of $1.


Calvin Ng said...

You need also a goal in ivesting; a stop-loss & take profit level. never fall in love with a stock, or you will end up missing the boat.....

Sam said...

You can be right and wrong. You should not fall in love with a stock that you don't know what the company is doing or how it is functioned.

You should believe in yourself if the company that you chosen is the one you know what it is doing and how its functioning.

Warren Buffett invested in company he know best and not the company he doesn't have confident in. I have read a book saying that Warren Buffett doesn't invest in Mircosoft, not because Mircosoft is not making money or mis-managing but he just doesn't know how it function.