Tuesday, 15 March 2016

To buy or not to buy

To buy or not to buy

Or rather to invest or not to invest.

I believe most people have this predicament when comes to invest their money into stock market or into any particular stock for that matter.  Sometime we asked this question to someone, sometime we asked this question to ourself silently and in more extreme situation, we asked someone upstairs for guidance. There are many reasons why this question is asked.

Why is it so. If one has done their homework, had done the homework on the financial numbers, had researched the company profile, their businesses, and even analysts have also given their outperform outlook, then why are we still asking this basic question - to buy or not to buy.

What are we really waiting for?

There seemed to be few reasons and some are rather perplexing. For example, I have a friend who do not buy or invest any stock even after he had done all the necessary homework. In the end, he bought a totally different stock altogether. When i asked him why. His answer was "I was about to buy but last minute my friend said this company cannot invest. My friend said this company has this and that problems. So better don't buy". "So what about your time doing all those researched", I asked further. "I was scare when my friend told me that", was the reply.

Another reason i noticed is there are too much information and this overload ourself. Wealth of analyst's reports, financial data, company information, gossip and whatnot and this make us confused on which stock to invest. Not that the stocks are not good but it is simply too many of them. Most people have limited fund to invest and this make us want to get the ONE stock that could give us the fastest capital returns in shortest possible time. And i see this as major hindrance to train ourself to survive in stock market in the long run. Many do not realize they actually end up as stock trader instead of stock investor.

When one decides to invest their money into stock market, the first question to ask is not "to buy or not to buy". Never. It is also not the question of "is time to buy now or not". Don't. The one question should ask yourself is "can I buy or cannot buy".

Can or cannot is related to capability to do something. Therefore, can buy or cannot buy is related to whether one could afford to do it. But be careful too. Can afford to do it now doesn't mean one can afford the same in the future. For example, one may afford to buy a car now but does mean one could afford to continue to own it in the future.

Once the question of afford(ability) is settled, then lets talk about objective. The objective must be about long term investment. If the objection is about quick bite and run, what you just read is irrelevant.

Many people asked me this question of "is it time now to buy". I have very simple answer if I asked myself this question. But my answer to myself might not be acceptable to the next people simply because of the above question has not been settled just yet.

If one has 100k to invest doesn't mean one could afford to invest in stock market because, first, the mindset is different which, in turn affect your objective. Second, could you afford the same, say, a year or two from now. Put it another way. If one has 100k to invest but needs the money to do something else in a year time. One could afford to invest the money now but when needs the money later, he or she may not able to get out in time. Worry will start to set in. The mindset will be clouded with uncertainty. One will be worried that the stock might not go up. Worst still if the stock went down then he or she is force to sell at a loss when the money is needed for something else.

But if the 100k is without any foreseeable plan to use, I believe the mindset is very much different. Time factor to get out from the stock market is not there to force you to make critical decision.

But how many people have the luxury of 100k sitting idling in bank or under the pillow waiting to invest in stock. Never mind. What you need is a correct mindset to start with. It works the same even you have only 5k. Once you have the correct mindset, you wouldn't worry too much of the current fluctuation of price because it is just emotional play caused by market players. And you wouldn't worry too much of the company itself because the company is as solid as hardrock. Ofcourse you must have done your homework well enough. Therefore, if affordability issue is settled, mindset is clear, company is solid, then it is THE time that will help you achieve your objective. And the time i am talking here is long term.

Good luck.

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