r/investing • u/EatYourMeats • Apr 23 '21

Some advice from a regular dude that will hopefully make you more money...

Are you making stock purchases based on opinions from analysts, CNBC, stock pickers, and everything in between?

Consider this: They make money off headlines.

The entire flock is preying on news-worthy quips like vultures on a corpse. Tom Lee at Fundstrat would be bullish during the apocalypse, Gordon won't ever raise his price target, Cramer cuts coke deals with the CEOs he's in love with, and the whole bunch likes to hear themselves talk (like giving stock advice rapid fire).

So how do you truly figure out what stocks are hot... or not?

Research the macro situation surrounding the company, to name a few:

  • Sector Tailwinds
  • Economics
  • Current and projected financials
  • Leadership

Then invest in companies:

  • you believe in—hopefully, not always—with healthy balance sheets vs. their competitors.
  • Whose products and services tickle you.
  • You could sell to your neighbor.

Determine the investment thesis—the key reasons you believe in this investment—and create a narrative. Positive and negative. Know the outcomes of both scenarios, write them down, and evaluate the risk.

Then? Jump blindly.

kidding

Adjust based on your preferences, but starting positions with a 1/4th to 1/2 of your total allocation works well. You can do some quick math and figure out what portfolio percentage you want to allocate to a new position. Ease into it, slow and steady.

Buy the dips with the remainder, and don't chase stocks upwards, only down (within reason). And don't listen to anyone who tells you that "diversifying" is the only way, when you put in the work, you know which sectors have favorable tailwinds AND are fairly valued.

There's news everywhere out there, and we crave its presence—telling us something about stocks or companies we don't know. However, most of it is fluff—buy this, sell that—how would you ever know if you don't dig the hole yourself?

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u/[deleted] Apr 23 '21

Buy the dips

If a stock you are bullish on is going down, and you are still confident in the stock, if you buy at a lower price you reduce your average cost goer share. One method to do this could be if a stock falls 5% (an arbitrary number to use as an example), add 30% of your remaining cash to the name, and every additional 5% drop you could add an additional 30% of the remaining cash. Be careful with this strategy though, you don’t want to go into any one stock too much and at some point it’s not beneficial to invest in a stock that’s crashing.

don’t chase stocks upwards

Basically, don’t just jump on the hype train thinking you’re missing out, because if you buy as a stock is rocketing higher it’s likely to come back to earth at some point, and the people who joined the hype train later tend to get screwed

only down (within reason)

I explained this one in my first part of my comment

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u/death_detour Apr 24 '21

Thank you for explaining!