The Worst Thing You Can Do (times 3)
This image from Seeking Alpha explains the reason this post starts with greed, fear, blood, and pessimism. I am not a fan of greed, fear, shedding blood or pessimism. However, there are times when others have these emotions or feelings, and those times can be opportunities for the wise investor.
The worst thing you can do when the market is going down is to sell. The second worst thing you can do is to buy 1,000 shares of something on a single day. The third worst thing you can do is to try to mimic my buys and sells. For that reason, I have been hesitant to tell you what I am buying. Today I want to make an exception with the hope that you won’t blindly do what I do. Let me address these three “worst things” in order.
Selling When the Market is Going Down
If you bought quality stocks, ETFs, and low-cost mutual funds, don’t sell them when everyone else is fearful. Perhaps your best strategy is to move away from the market and read a good book or help a friend with a project or send an encouraging letter to someone who is hurting.
I never sell when the market is going down unless the position in question jumped up in some irrational short-term way. So, for example, if everything is going down, I might sell something that jumps up 15% on the same day the market is in decline. Better yet, I would probably sell a covered call on the position. That is what I did last week with my OLN shares. Irrational behavior on the part of others is opportunity for the wise long-term investor.
Buying One Thousand Shares at a Time
Yes, I realize most of my readers won’t do this. However, some of you might do something that is like this. Let’s say you decide you want to buy ten shares of AMZN. When the market is heading down, buy one share. If the market continues to go down, and AMZN shares drop some more, buy another share. If it continues to go down the next week, buy another share. I have been doing that with Amazon since March 10, 2022. One of the shares cost me $3,378.50. However, I bought a share of AMZN yesterday for $2,400. I now have one share in my ROTH IRA and thirteen shares in my traditional IRA. If the price drops some more today, I will buy one more share.
Buying What Wayne Buys
Why is this the third worst thing you can do? Doesn’t Wayne know a good investment from a bad one? Doesn’t he have a crystal ball that helps him know what the future holds? I’d like to think that I know a good investment when I see one. But that doesn’t mean I am always right.
The primary reason you should not mimic my stock purchases is that you probably don’t have the same asset mix that I have. Furthermore, I can afford to have all of my Amazon shares become worthless without having a massive negative influence on our total investment future. My Amazon shares are less than two percent of the total assets in my traditional IRA. If you bought fourteen shares of AMZN today, they might cost you $35,000. What percentage of your account would two shares of AMZN be in your account? If it is more than five percent, then don’t mimic my approach.
What I have been Buying
Having said all that, I will tell you what I have been buying. I started a new position in PBR and have added shares so that Cindie and I now have a combined total of 400 shares. PBR is Petróleo Brasileiro S.A. – Petrobras. Don’t buy PBR just because I am buying it. PBR is an international energy company located in Brazil.
I started a new position in GILD yesterday, buying 100 shares. GILD is Gilead Sciences, Inc. GILD is a healthcare company. I have, as noted earlier, been building a position in AMZN. Amazon is a consumer discretionary company. Again, don’t buy it just because I am. However, the main point is that perhaps you should be buying something if you have cash sitting in your account. Think about it.
Cindie and I own 400 shares of PBR, 14 shares of AMZN and 100 shares of GILD.