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Most liked posts in thread: Do I keep investing into the same company after purchasing stocks of it?

  1. luutzu

    luutzu

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    How long you can, or should, hold onto a company depends on whether or not its future presents great value or not.

    You can hold onto a dog for 30 years and it could die on you in 10, costing you loads of cash from the "rights" issues they needed every now and then to stay alive (or "grow"). Not to mention opportunity costs.

    So think "long term" not in terms of time. As in, don't think that if you put money into a business and don't mind waiting for a long time that it's automatically a good investment idea and strategy.

    There are businesses that, yes, are so good that even if you bought in at a high price, had the misfortune of its industry going into the headwind for a couple of years... you hanging on and in about 10 years or more, all the bad stuff just made it stronger and you more profitable.

    So there's those good qualities, buy to hold until the kids inherit it.

    Then there are terrible businesses burning money millions on billions... they can be bought and you can hang on for a few years or even a decade or more... and it still wouldn't make you much.

    I guess what I'd do is try to figure out whether or not a business is one of outstanding quality that, as Buffett would say, any idiot could run. Try to buy into it at a reasonable, or very cheap, price (that depends on both luck and a lot of luck)... then keep an eye on them.

    Great businesses rarely sell for reasonable, or cheap. They do tend to be overpriced too.

    So if you hold one that was bought cheap and the market thinks too much of it... then if another opportunity exists that you could do with the cash from that sale. Obvious what you'd do right?

    In the end, I think investment decision should be made based on the quality and value of the business; not on the time you hold it.

    That's not to say you should jump in and out, or try to time the market or time the stock. That's something you should only do if you can predict market movement or have a time machine.
     
    rb250660 likes this.
  2. pixel

    pixel DIY Trader

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    Hi Bob, and welcome to ASF.
    Luutzu has given you already a great summary. In a nutshell: Don't focus on a dozen or so of today's stocks to hold for 30 years, but evaluate the Market from time to time. That may show you that one or two of your current holdings are beginning to bark - turning into dogs, I mean. Why would you then want to make matters worse by buying more?
    By sticking with the same selection got decades, you will also forego the opportunity to buy into some new technology or up-and-coming company.
    I shudder when I think about OneTel or African Petroleum, to mention but two. Or read up on the miracle of Poseidon between 1969 and 1970: https://en.wikipedia.org/wiki/Poseidon_bubble

    By all means, do your homework and home in on a dozen shares that you consider worthy of your investment dollar. Buy and hold them for as long as they retain their merit and remain suitable for the purpose YOU selected them. But do keep an eye on the sector, industry, and fundamentals because some new invention or unexpected development can quickly turn a market darling into a feather duster.

    And then there are some global events that make a mockery of any buy-hold plans. The 2007-2009 GFC is a case in point. For a retail investor, no strategy could beat the advice "Sell at the top and buy back at the bottom."
    I admit that identifying the top with confidence was not easy, and those of us who warned of a sharp correction copped a lot of flak from buy-hold investors. Check any stock you like and compare its price in November 2007 to the one in March 2009, and you will have the answer.

    Try to locate a copy of Phil Carret’s The Art of Speculation.
     
  3. Smurf1976

    Smurf1976

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    I select stocks based on fundamentals but realised long ago that I'm usually too early.

    I may well want out due to fundamentals but if the price is still trending up the I may as well capture as much of that as possible.

    Placing tight stop losses and following the trend up but not placing any definite sell order has greatly improved my trading and avoids the "too early" problem to which I seem to be prone.
     
  4. Smurf1976

    Smurf1976

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    Just realised I posted in the wrong thread.

    It probably has some relevance here anyway.:)