Sunday, December 16, 2007

Making A List, Checking It Twice

With the Fed's decision to only cut interest rates by 0.25%, we should all be reminded that it is certainly not wise to buy all at once. No matter how great your stock is, there are other factors out there in the market that could affect your stocks performance, even if the company is raking in the money. What you need to realize is the difference between a stock that has been taken down along with the market, and one that truly does deserve to go down based on it's future earnings and fundamentals.

So, when you have a great company that you have invested in, and you believe can be even better in the future, you need to stop and take a look at the bigger picture. All stocks take unjustified hits from time to time. This is were following the general stock market can help because on some days, almost everything goes down. Remember, long term investing allows you to purchase shares of a single company at many different prices over time to build your position in the stock.

As long as the long term story of a company is still in tact you can feel at least a bit more confident that you are making a good financial choice when you add to your investment at a lower price, and in turn lower your cost basis. (Cost basis is simply your break even point on the stock)

Even though the market is very unpredictable, one thing is for certain when you look at the scheme of things. While the banks, mortgage companies, and many other business maybe in trouble , there are way more companies that are thriving in a booming global economy. Just because the "precious" United States hits a financial speed bump the rest of the world will just look on and continue to expand at it's rapid pace.

Now for my prediction for next week, and the week after that, and the year after that... BA, GOOG, CECE, VDSI, and YUM! Merry Christmas From Stock Picky!

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