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Statutory Warning: Stock market investment is the most risky investment possible. Stocks may lose its entire value, leaving you with no money and no future! (My version of the disclaimer)
Saying the above warning let me confess that I started buying selective shares starting today. This is investment, not trading. I don’t trade stocks, I invest in stocks that means I buy and hold them for long-term.
I do not follow Cramers of the world or for that matter any TV expert. I don’t go to alphas and fools for their advice either. I believe only in Buffet and his philosophy.
Buy when everybody is selling and sell when every body is buying
For past few months I was waiting for this day, the day when Dow will be below 11,500 to buy some more stocks to add on to current portfolio.
I invest 15% of my monthly saving in to stocks, and I save 50% of my salary, so I invest 7.5% of salary in stocks. I wasn’t buying any share since April and this money was sitting in checking account waiting for its turn to be picked up.
My stock investment strategy might sound funny as I buy only those stocks which Berkshire Hathaway has in their portfolio.
My Stock investment strategy
- I buy only those shares which Warren Buffet has invested in (I already have GE, PM, YUM, KFT, COP etc), safe heaven, no research required, easy pick.
- I do not sell usually, I sell only when Mr. Buffet sells (this has certain draw backs, hope one of my readers catches it, so not mentioning it now)
- I buy as many stocks of a particular company that I can have in $2000 (I have less COP stocks than GE because GE price per share is lesser compared to COP). This is to diversify my portfolio and to limit risk.
- I keep dividends from each stock (all my stocks are dividend paying) in brokerage account (I use MB Trading, ever heard off?), and wait till it reaches $2000, at that moment I buy another of Buffet’s shares.
- I never bought and will never buy a share which is less than $10 a piece.
- As I said before, I am an investor, not a trader that’s why I never day trade. I understand that there are industries out there, where employees trade shares all day long, make hefty profit out of it. But, I am not just that educated in stock market trading, so I keep off trading stocks.
I bought shares of AMEX, and Wesco today, and planning to buy IR tomorrow. ( I am writing this post on 08/04/2011 evening, stock market collapsed by 500 points today, if you have found me through Google search and have no clue what I am talking about)
Why I am buying now
- I refuse to be one of those small investors who buy at top and compelled to sell at bottom. (this group contains 80% of the investors)
- The stocks I was aiming for are at record low today.
- I bought few shares in 2008 and received 100% return of investment in last 3 years, I want to repeat that feat.
- I had stock money sitting idle in 1% interest paying checking account, almost loosing value to inflation.
- I am young with a family of two, I can afford to take this risk.
- I didn’t invest a fortune; only 15% of my savings in last few months went in to buying stocks of reputable companies.
- If I decide to spend my retirement days in my home country, I can retire now with my current savings and live life happily ever after. If I lose all stock money, I will do just that.
As I said, I do not follow any body’s investment advice, I am not asking you to follow my advice either, do your own research and buy stocks you like, whatever you like.
Saying that, are you buying stocks this week? Which ones and why? Wait a minute; are you the ones who sold off today?
Thank you for reading it through the end, hope you got the message I tried to convey. And the message is if you are brave, go for it.
Do remember to follow me on Twitter and/or Facebook, and subscribe to my RSS feed, coz’ I will help.
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Don’t buy! Now is not the time to buy! This is what I wrote on Yakezie forums.
“So how do we explain yesterday’s crash? Since talk of QE3 has began, investors are waiting for it to happen. As I’ve mentioned before, all the insiders and big successful hedgefunds (like Barry Ritholtz) have sold out and gone short. Why? Because instead of waiting, they plan on forcing the Fed to initiate QE3 sooner than later. So they’re going to batter the market until Bernake decides to initiate QE3. In other words, they’re going to make money when they force the market to go down, and make money when Bernake announces QE3.
So what would Bernake do? Let’s apply a little bit of logic here. I don’t believe that Bernake would actually initiate QE3 until at least October. Why? The Fed chairman wants to save some bullets for the time when he’ll really need them. If he initiates QE3 right now, he’ll be virtually out of bullets. But then again, I pushed out that conclusion based on logic. Judging my Bernake’s past actions (he’s only been a professor, he’s never had any real experience in finance), he might not conduct his actions based on logic.
But what I certainly see is that the economy is getting worse. You can see that from the quarterly reports of company’s like Wal-Mart and Home Depot. So what does this mean? I don’t really know. Sometimes, just because the economy worsens, doesn’t mean the stock market will decline (the Fed purposely props up the market with QE). But one thing’s for sure. Liquidity is going to dry up. So if your mortgage is due right now, I suggest you lock in your mortgage payment. We got ours at 0.9% off the prime rate.
So what am I doing? I’ve mentioned before on my blog that I never short the stock market. This is because shorts require immaculate timing, and I’m more of a good investor than a great trader. So right now, I’m all cash. I’ll wait for the market to dip another 5% or so, and then I’ll start buying into the market with 10% of my portfolio every time the market goes down by 10%.”
I can almost guarantee you that within 4 months, the market will go lower (probably down another 10%). It pains me to see another hardworking Yakezie member lose money off the markets.
Thanks for your concern and detailed explanation Tony. I am amazed to see your in-depth knowledge about stocks. In capital market topsy-turvy situation will continue. But, I am not worried about what will happen next year or in next two years. When I buy stocks I hold them for many many years. This purchase is also for long term. I might not sell these even in 10 years. I am not worried about my purchase, I am rather happy that I bought at a lower rate.
You can buy at an even lower rate if you waited.
You are right, but can any one really predict a bottom?
I also am not buying but not for the same reasons. I simply think that the economy will enter another recession and that unemployment will stay high. I don’t see any demand percolating through the economy. The fact that the US was on the brink of default will cause many to assess their personal finances. Consumer confidence is out the window.
I absolutely agree with you.
You have point but I don’t want to be so negative. Can a economy like ours be down for next 10 years? Most likely not, and that’s why I am not panicking. The graph will ultimately go upward, may not be in next few years but ultimately it will.
Good for you. If I had the cash (IF) I would be right there with you. The dip was definitely a better point to purchase than Wednesday, but who knows if this is just the first of a series of corrections over the next few months? I hope not, the jobs data seems to indicate the economy is progressing positively.
I am hoping to get another dip in next 3/4 months, that will give me one more opportunity to invest. I will wait for Dow to go down below 11K to invest again.
I was a buyer on Thursday, SB. Alas, I bought on the way down and not at the bottom. Like you, I bought to hold, so market timing is important, but not all-important.
Interesting philosophy you have. Can’t go wrong with Warren.
Yes you need luck or some gifted sense to buy at bottom. My limit buy worked somehow very well, both stocks were bought at close to day’s low. At least I haven’t heard Warren going wrong.
SOunds like a good strategy – “be fearful when everyone is greedy, and be greedy when everyone is fearful”
I would try to buy more, but I’m focused on debt repayment.
All the best Jeff! Getting over debt should be the priority.
Interesting strategy.
I put $2,000 into the kid’s 529 on Tuesday. It takes a few days to buy so I think I did OK. I’ll put in another $2,000 near the end of the year.
This account has an 18 years time line so I’m pretty sure dollar cost averaging will trump the short term decline.
You have a baby boy! and you are doing awesome job to have started 529 for him. Excellent decision, one of the best financial decisions you could ever make.
I am not sure I understand your technique. If you are just following Warren why not just buy fractional shares of BRK.B or .A through sharebuilder?
I make my finance fun, buying only BRK vs. buying shares that constitute BRK is more fun. Also some companies BRK has which are not publicly listed like GEICO, Burlington norther etc