The Least Important Investing Metric

When do stock prices matter?

Every investor needs to have a set of rules for buying and selling investments. A common misconception I see when training a new investor is their deep concern about the price per share for a stock or an ETF. This is misplaced concern. Usually the price only matters on three occasions in my evaluation. But it isn’t whether the shares are $5 each or $300 each. I would rather have one share of a $300 business than sixty shares of a poor high-risk $5 business. There are, of course, several “ifs” that need to be considered.

Price Matters When I am Buying

Price matters when you are buying. However, the dollar amount is immaterial. What matters far more is the future of the business, their marketplace, how they reward shareholders (owners of the business), their long-term debt and their vision for the future. Some of these are easy to determine, and others require a bit more thought. For example, I own shares of Walmart and Target. Many thought Amazon would render them obsolete or destroy them in the marketplace. I think it is true that Amazon contributed to the downfall of Sears, Toys R Us, and some other retail businesses. Many think that Tesla will kill Ford and General Motors. That may explain the price/share for TSLA shares.

Price Matters When I am Reinvesting

I used to have automatic dividend reinvestment turned on for many of my holdings. Now that the cost of buying and selling shares is $0.00, there is no reason to let the market determine my buy price. Rather, I collect the cash and then invest opportunistically. For example, I recently added to my shares of Steelcase Inc. (SCS) because I saw an update that an insider (Senior VP Eddy Schmitt) bought 30,000 shares at $10.04 per share. This is reported on SEC Form 4 and I got a notification from Seeking Alpha about the buy. I wanted more shares because senior VP’s don’t pay $300,000 for shares unless they have a good reason.

Price Matters When I am Selling

Actually, it probably doesn’t. The only time price is a part of the equation is if I think the price of the shares has exceeded the future realities. So, for example, if one of my holdings goes up by 10% or more on any given day, I might sell some or all of my shares. As a long-term investor, I don’t really make sell decisions based on the current price. If I did, then in my opinion, I am not a long-term investor.

Retired Investors

There are different kinds of investors. My grandchildren have UTMA accounts that I manage for them. The way I pick their investments is far different from my approach for our IRA and ROTH IRA accounts. As a retired investor, I want to see reasonable income from most of my investments. Therefore, the current stock price (or ETF price) is of little interest to me. Because I want income, I am more inclined to focus my investing dollars in sectors with healthy dividends. You can review the following to get a sense of what I do from a big-picture perspective.

Rebalancing Is Not My Desire

I don’t want to be like the overall market. I’m retired. Value but more small cap is my focus.

Rebellious Regarding Market Sectors and Market Cap

My sector weightings do not fit the normal adviser’s recommendations.

Dividends Matter

Dividends keep flowing for income almost every day of every month.

Bonds and Cash are Dead Money

Cash (Bonds and Short Term) are not a good place for most investors.

Full Disclosure

I own shares of SCS, WMT, TGT, and F. I do not hold shares of AMZN, TSLA, or GM.