10 responses

  1. Ankesh Kothari
    October 24, 2008

    Thanks Cameron for a timely post.

    I agree that its the perfect time for buying. (I just put some money in the Indian stock market which crashed too.)

    I don’t agree that we should buy stocks now because “Some great companies are selling for half, even 75% less than what they were a year ago. ”

    You should build a stock strategy that has 3 *rules* to it:
    1. Entry – when to buy stocks
    2. Exit – when to sell stocks
    3. Position sizing – how to diversify and maximize your returns

    If you don’t have all 3 rules written down before you invest, your chances of succeeding will go down like crazy.

    These rules should not change whether the stock market is up or down. The only thing that should change is the intensity of action that the rules bring *automatically*.

    (So if you are a value trader and have a entry rule like you’ll invest in stocks only with high ROA and low P/E – then when the stock market is bullish, you’ll find very few stocks to buy. And when it crashes, you’ll find a lot more stocks to buy. But at any time, you’ll be buying stocks because they show good promise which is indicated by their ROA and P/E ratios. Don’t buy stocks just because the market is down. There are still a few stocks out there that are still over valued – even today.)

  2. Cameron Schaefer
    October 25, 2008

    @ Ankesh,

    You are right when you say you shouldn’t just buy because a stock is discounted without first running the numbers. I was trying to simplify things for the average joe, but due diligence is a necessary part of every investment, so thanks for pointing that out.

    That being said, my basic point was simply that it is much smarter to buy a company like GE or Coke at a discount and the time for great discounts is now.

    I’ve always been interested in investing more in India and China. Sometime you will have to give me an education on some of the various companies that you like.

  3. Jason
    October 25, 2008

    Well said, Cameron. If an increasing rate of investors acquire the undervalued stocks there would be a corresponding softening of the losses in market value that arise from fear inspired sell-offs.

  4. Ray The Money Man
    October 25, 2008

    Buy and hold is dead. What is so hard about taking your profits. If you have an obsurd profit why not take it. At least sell 1/2 or 3/4 of your position. These stocks do not go straight up and with all that has happened this year, take your profits!

    Great post!

  5. Sara at On Simplicity
    November 5, 2008

    This is one of the best things about being in my twenties: everything’s an opportunity. Reading Peter Lynch talk about Black Monday is another Buffet-esque reminder that downturns are sales in disguise. Thanks for showing the other side of the coin!

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