Did You Buy a Good Company or NOT?
Posted by naveedsmind on May 12, 2008
“Within moments after clicking “PURCHASE” for my Brasil Telecom, the stock started to turn sour. I watched it fall and continue falling. By the time the market closed – my investment was down over 5%.”
I think we all can narrate a story very similar to mine. But don’t worry! We’re investors! Not gamblers!
In fact – having a recent stock make a downturn like this can actually serve as a good exercise. If you did your research and then bought a good company at a good price – you now have a chance for an even cheaper price. Quite simple. It’s like the eggs at the supermarket on sale and you buy a dozen. The next day they’re even cheaper – so you buy a dozen more. Of course, you don’t need more than two dozen eggs because then your pantry is filled with no room for other great investments.
When I bought Brasil Telecom – I was confident of the company and of the price. A 5% decline gave me a chance to pick up some more. Bottom line – if you start to sweat and think about selling because of a couple point decline – then did you really buy yourself a good company? Or not?
That should be investing rule number one. Before you click purchase, ask yourself, “If this stock tanks 5%, will I still be comfortable with my investment?” If the answer is no – then it’s time to retreat to square one and do your company research. Good investments are made only in good companies.
