For most people, stock market investment is probably the easiest investment to be involved. All you need to do is to decide what business should be invested or divested with just as low as few dollar charges per transaction.
Since there is no free lunch in this world, I would like to discuss the difficulty behind the decision making in stock market investment.
Generally, when market is bearish, many value investors will come out to point out the chances for long term investment. This is because the chances to earn money is very high by investing good business with very high discounted prices. I myself did recommend people around me to make some investment in the last few years because the prices of many good businesses are very attractive.
In short, when a business is undervalued, it is pretty easier for me to make decision - Buy.
Another easy decision to be made is when a business is overvalued - Sell.
Of course, we should know that it is almost impossible to sell a business with the highest price because we need to know who is the last person who is willing to buy the shares from the market with the highest price. Besides, we also need to compete with other Sellers in open market.
In other words, it is doable for us to "Buy Low, Sell High"; but it is impossible for us to "Buy the lowest, Sell with the Highest Price" every times.
As a value investor, it is really very difficult for me to make a decision when the market price of a business is approximately equivalent to the value of the business that I have estimated.
Business is dynamic. Every change that occurs internally or externally affects the value of a business. The effect can be either short term or long term. Thus, the ability to evaluate the effect of an event on a business is an essential skill to survive in the market in the long run.
My current strategy:
When my portfolio has sufficient cash for any unforeseen circumstance, I will just keep my valued businesses until they are overvalued.
Recently, many friends found out that I rarely recommend business for investment. Well, after reading this sharing, I think you know the reason - it is extremely difficult for me to make decision in stock market investment now!
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Written by: Xaivier Chia
P/S: The above sharing is solely based on personal insight and information that believed to be reliable. Your valuable feedback are very welcome.