I am new to investing. I haven’t even completed one quarter of investing in the share market. During the beginning days, I spent a lot of time understanding the financial terms. Phrases like rally, bull market, bearish were alien to me. I could have chosen two ways to invest. Either learn the basics of investing and learn as I go or give it to a financial advisor. But being the DIY guy, I decided to do it myself.
In this short experience, I have seen the share market climb and fall into the abyss. Long term investors are advised not to look for dips in the market but keep investing whenever we can. This post is about disagreeing with this suggestion.
Explaining the share market with an example
I bought Hindustan Unilever stock during COVID-19 situation. Because everything was under lockdown FMCG goods were high in demand. Hence HUL stocks were climbing continuously and it rarely fell. Being the amateur investor I invested in these shares hoping for a climb. I did not check the Price to Book value which should have been reasonable. This was a mistake from my side.
Now that the lockdown is almost about to be over the stock price of HUL corrected a lot. And since I have bought when it was at a high price now my portfolio for that stock is in minus. It fell to such depths that its been one month and still it hasn’t climbed to its past glory.
Always invest in financially strong companies
Luckily I have never invested in stocks which are not financially strong. I know that HUL will keep climbing. But since the price has lowered it will take time to reach my average buying cost before going into profits. This is against the suggestion that investors need to keep buying shares and invest. Even though the stock is very strong I should have waited for the correction. There are two reasons why I decided on buying HUL stock. The first is – as I said above because it was climbing into profits. The second is because I am scared of saving money and wondering if will get spent.
Had if I have saved the money and waited for the right time I could have bought into the HUL price dip. This would have given me a good buying average and I could have earned profits quickly. Nevertheless, I haven’t sold any of the shares. Since my aim is for longterm any good share I have is worth it.
What I suggest to the future myself is that, if I find a very good stock but its prices are not great then wait for it. Keep that particular amount aside and wait for the right time. Being patient in the stock market is one of the best qualities. It comes with practice. And by writing here I remind myself about patience and waiting like an alligator.