Eager to buy stocks as they plunge on Trump trade war tweets? Licking your chops to buy some former tech high-flyers like Action Alerts PLUS holding Nvidia (NVDA) - Get Report and Micron (MU) - Get Report nicely off their record highs?
The answer is probably yes to both seeing as you are an active trader instead of a disciplined long-term investor. Nothing wrong with trying to make the quick buck each minute of the trading session. But in these more volatile markets, it's best that even the active trader comes to the table with more disciplines than studying stock charts.
Here are several fresh investing reminders from Smead Capital Management's director of research Tony Scherrer's in his latest client note. Use them wisely. And you're welcome.
Says Scherrer, "The endeavor of meritorious investing should not be to seek out comfort, especially at extremes. In other words, the easiest time to cozy up with overbought consensus is times like this when the world will treat you as a one-eyed monster if you see otherwise. Remember, this is not a popularity contest."
Yes, Stock Valuations Matter
Do your homework on company valuations, especially in these markets.
Says Scherrer, "Valuation matters dearly is a saying that offers efficacy in investing! Consider that 71% of the time, the MSCI World Value Index has outperformed the MSCI World in rolling 5-year periods from January 1975 through April 2018. The current rear-view mirror is very misleading compared to what has normally worked in investing over time."
Shopping Meetings Investing
Look for the sales in this market just like when shopping for new clothing.
"Buy stocks the same way you buy a new suit or dress. If it's on sale, you're more compelled to want to own it," Scherrer says. "This sounds basic, but in a world of $1,000+ stock prices that have done well lately, remember that doesn't make them more attractive for new money, it makes them less Conversely, prices dropping for high-quality securities makes ownership more attractive."
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