BillyBob29
CAGiversary!
[quote name='dmaul1114']Yep. You want to buy low and sell high, so now's a pretty good time to buy. I doubt will see any huge drop offs, probably just bounce around from 7500-9500 or so for the next year. So it's a good time to buy in, and hold stuff for a while--especially if you're young.[/QUOTE]
This is not simply a reply to you dmaul but more of just general info to many of the youngsters on this board that may be dipping their toe into the investment waters for the first time.
I disagree with, and actually hate, that old saying "buy low, sell high." If you want to make real money, you need to do much more than simply buy low, sell high. You need to buy sound businesses that have attractive growth opportunities and that are selling at a market discount. Basically, you need to buy strength because the strong companies in the downturn will only emerge stronger during the next upturn. You can't simply look at a stocks price in relation to what it was trading at 12-18 months ago and say, well this is cheap because it is only $20 now and it was $95 a year ago.
Just because something is "low" doesn't mean it will recover even over many years. A lot of companies are not going to survive this downturn and a sizeable amount of companies that were trading at very high levels over the past few years are unlikely to see anything close to their highs of the past few years anytime soon. There are a lot of broken business models out there that are going to fail or need massive change in order to survive.
If you are looking for long term plays, start with the business model, then the balance sheet and then look at the current price, valuation and growth expectations to determine if it is in fact a low or cheap price.
A lot of companies have got "cheap" because their businesses have simply fallen apart and you don't want to buy a broken business.
You also need to be well diversified because the volitility is far from over. The 3-5% daily swings are going to be the norm for quite some time to come.
There are certainly a lot of opportunities out there but don't be fooled into thinking that just because a company is trading for $30 less today than it was 12 months ago that it is now "cheap."
This is not simply a reply to you dmaul but more of just general info to many of the youngsters on this board that may be dipping their toe into the investment waters for the first time.
I disagree with, and actually hate, that old saying "buy low, sell high." If you want to make real money, you need to do much more than simply buy low, sell high. You need to buy sound businesses that have attractive growth opportunities and that are selling at a market discount. Basically, you need to buy strength because the strong companies in the downturn will only emerge stronger during the next upturn. You can't simply look at a stocks price in relation to what it was trading at 12-18 months ago and say, well this is cheap because it is only $20 now and it was $95 a year ago.
Just because something is "low" doesn't mean it will recover even over many years. A lot of companies are not going to survive this downturn and a sizeable amount of companies that were trading at very high levels over the past few years are unlikely to see anything close to their highs of the past few years anytime soon. There are a lot of broken business models out there that are going to fail or need massive change in order to survive.
If you are looking for long term plays, start with the business model, then the balance sheet and then look at the current price, valuation and growth expectations to determine if it is in fact a low or cheap price.
A lot of companies have got "cheap" because their businesses have simply fallen apart and you don't want to buy a broken business.
You also need to be well diversified because the volitility is far from over. The 3-5% daily swings are going to be the norm for quite some time to come.
There are certainly a lot of opportunities out there but don't be fooled into thinking that just because a company is trading for $30 less today than it was 12 months ago that it is now "cheap."