Whenever I see news stories about anxious markets and falling stocks, I have four short pieces of advice that I say to myself. They could help you if you are feeling anxious about your stocks. If your trigger finger for selling is getting itchy, go over these points to help make better decisions.
– Don't panic
One of the biggest enemies of investors is fear. It can make you want to sell at the worst time. The media talks of market woes and low share prices because it has to sell headlines. That doesn't mean you have to buy it. The S&P/ASX 200 Index (INDEXASX: XJO) has been at its current level already six times before within the last year. That's actually old news.
– Concentrate on quality stocks
Even strong stocks can sag in share price, but it's their earnings in the end that make the difference. Quality companies usually hold up better in corrections and recover quicker when the market rallies. I think Domino's Pizza Enterprises Ltd. (ASX:DMP) and Suncorp Group Ltd (ASX: SUN) are financially strong and growing stocks to buy.
– Watch the field, not the scoreboard
Price changes in the short term sometimes don't have much connection with how a company is actually performing. Do your homework on your favourite companies and you'll know their value better. If the price falls closer to that value, you get an even better discount.
– Make a list of the companies you'd love to buy at cheaper prices…and wait
Decide which stocks you would like to buy more of. Also, sometimes the best stocks to buy on weakness are the ones you already have. If they sell off, then you'll know which to buy and not waste opportunities. I'm watching companies like Crown Resorts Ltd (ASX: CWN) and Challenger Limited (ASX: CGF) for even better bargains.
– Wait for better prices while the market naturally adjusts
Around reporting season, many stocks are run up on market hype. When earnings news is past and stocks go ex-dividend, the "sugar high" disappears. These are much better price levels for stock pickers, so enjoy the sell-off, don't dread it.
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