Is it wise to buy more shares of the same stock when the stock price rises? (fund, cash)
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I know people buy more when the price falls, what about when it increases?
buying high and selling higher makes money far more times then trying to buy low and sell high does where next stop is usually at a loss . trying to catch a falling knife usually ends up triggering stop losses or scaring people out of the investment .. .
we all thought when we fell 2,000 points in 2008 that was low . little did anyone know we had 4000 more to go .
Don't try to time the market. You should buy stocks on its fundamentals not on the recent price movement. The stupidest answer I have ever heard it's buy low and sell high. You probably don't know if it's low or high but you should consider it from your own targets and ROI. Different strategies require different actions.
I have a tendency to buy in small increments when stocks go on sale or have the technical momentum that things are moving in an upward pattern. When things get overbought or appear "toppy" with a PE ratio higher than what's normal for the stock, I trim aggressively. From my experience over the last 17 years, stocks take the stairs on the way up and take the elevator on the way down. It's not so much that I'm trying to time the market, but it's a matter of locking in my profits and making sure I have the cash ready to buy after a correction.
"Buy low sell high" is no more stupid than "Buy High, Sell Higher," No one knows what a stock will do the next day or in the future, as has been emphasized on these boards daily.
Then, at the same time, buying more, and over time (which in essence is "DCAing") has been warned to be a sub-optimal way to invest.
Here's my advice: tune out all the contradictory caca and ignore the platitudes. If you think a share price looks to be a 'bargain' (however you define bargain) then purchase. If you still consider it a bargain even if/when it ticks up, purchase some more.
Note: "Bargain" is the accepted investing reason on C-D for "buying one or more shares when the price is lower." It's part of the (wink-wink) "I'm not timing the market, I'm just picking up some bargains" game.
I look at the Fair Market Value of a stock--either figured myself or using the Morningstar page for the stock. If the stock is selling for over the fair market value, then I consider it overvalued, and probably wouldn't buy.
I just couldn't imagine buying a stock based on the price and not on the fundamentals of the company, but I know the people who follow charts do that all the time.
I've bought more and more of MO and O as they've continually risen over the past few years. If you think a stock is a winner long term, then keep on buying until you have a reason not to...
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