May 7, 2008

I am not swinging yet...

Most of the businesses that I have on my watch list have rallied significantly, some 20% plus. Sometimes in the back of my mind a voice tells me to jump in and buy before I miss a major move. But I have to keep reminding myself of:
  1. I don't "need" to buy, if my money is sitting in a money market fund that is ok.
  2. I need to make good investments.
  3. My first priority is to limit my downside risk, and I do not mean the statistical kind.
I always remember Buffett analogy of investing is like a baseball game but with no strikeouts, so you do not have to swing at all. You can always wait for that perfect pitch and load up big. I am fine with that approach I actually prefer it. So if the market recovered and I missed some opportunities, others ones will pop up some other time.

It is important that any investor to do well to "pick their spots" in several ways:
  1. businesses that you are familiar with and have some expertise from work or general interest
  2. investing process that you are competent in executing to analyze a business
  3. price levels that gives you comfort and confidence that you are not overpaying.
So do not feel pressured that you have to buy something, so watch risk carefully as it is more important that eying returns.


MG said...

Easier said than done....I usually have an itchy trigger finger. I usually see something I like, and I hate thinking that I could be earnings dividends when my money sits..

Sami said...

I know what you mean, but I am content with doing nothing.

I also believe that the price I pay for an investment for the most part determines my rate of return. so for my approach I will wait for the price I am confident about and forgo the dividend payments.