Don’t Chase Stocks

Perhaps one of the best pieces of advice I’ve ever been told with respect to investing has to be “don’t chase stocks.” Stock price movements often are not linear. Anyone who finds themselves wondering “why didn’t I invest earlier” or “how did I not see the peak” may be chasing stocks, and looking to time the market to buy low and sell high.

But they are actually doing the opposite.

Momentum trading has actually done fantastically well over the past decade, so many reading this may choose to ignore these ideas and continue piling into stocks that just continue to go up, with no signs of slowing down.

I’m an overly cautious, conservative investor who probably buys stocks too early and holds on too long. The main strategy to grow one’s wealth over time that I subscribe to is one inspired by Warren Buffett -- “buy low, and never sell.” After all, if you believe the companies you’re looking at have a great long-term future, buying and selling will only incur fees and taxes along the way, eating away at one’s long-term returns.

Buying a stock only after it has appreciated to a certain degree defeats the purpose of investing, in my opinion. I believe one should always be looking for the best companies out there, have a watch or a buy list, and then buy these companies at the right price or valuation.

If it just so happens that a stock’s price goes up, but its valuation remains fantastic, then great - go buy it. If you’re buying stocks solely on whether or not it has been increasing in value, or how much momentum it has, watch out.

Invest wisely, my friends.