One of the most common mistakes made by inexperienced investors is trying to "catch a falling knife " . This is used to the habit of buying shares in " free fall " describe sense , and is a bad strategy , albeit common among new investors . Unfortunately, it is a common practice even among old and experienced investors . I myself have even fallen prey to it .
Remember, there are two primary approaches to investing : fundamental analysis and technical analysis . We generally fall into the basic camp , because we evaluate stocks based on their valuation, instead of looking mainly to short -term price movements . We take this direction , because we believe this offers the greatest potential for long-term success .
A single-minded view of only the foundations of an investment , however, the profit of the investor and lead to some nasty positions . This is because there are real limits for buying a stock if it falls. One can have a stock that looks like a great value buy at $ 10 only to see it drop to $ 5 . Certainly , if the stock increases to $ 20 , you can have " right " been able to buy at $ 10 , but one could say that you are not " just enough " . Buy from 5 would have led to a 300 % return , while settled for only 100 % . Moreover, if you were convinced that $ 10 is a reasonable price , you could have saved time by buying it on the way back to the top instead of on the way down .
It's very simple - buying a stock in mid- fall is not a pleasant experience , and it is not difficult to come up with a variety of other strategies that would bring happier outcomes .
Yet we should not all files have dropped to avoid . In fact , studies have shown that investors who buy shares that are difficult cases tend to perform on a regular basis . Market better In fact , such a bottom - fishing strategy offer one of the best performances of all strategy sets. Lack of these opportunities can be costly .
The decision whether or not to buy " fallen angels " , but WHEN . This is where a bit of technical analysis skills comes in handy. Although technical aids can not really say to buy ( unless you're willing to take a piece of junk that happens to be a good price to buy are momentum ) , which shares can lead us to a better understanding of the timing . Once we have chosen a good investment based on fundamentals , it's time to decide where to put the money. Down
A good first step is to look for a positive movement on good volume before committing . As long as the stock falls , there is a good chance that you get . 's At a better price Better to wait a few days ( or weeks ) to ensure timed correctly your purchase. There is no advantage to buying before the time is right , even if the choice of the stock is ideal. It is here that patience is a virtue . Do not try to catch falling knives , but make sure to pick up after they hit the floor . They
By: Scott Pearson
President Scott Pearson is the Chief Investment Advisor for Value View Financial as well as a writer , editor , instructor , and business leader . As editor and publisher of Investor 's Value View, a national investment newsletter , he provides general money tips and investment advice to readers , and shows a particular talent for locating and providing analysis for undervalued stocks . Scott reached for questions or comments please send an email to
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