The Reason To Buy or Sell

 If you not have any stock, then you should first buy a stock. For those who has own a stock, there will be a doubt (most of times) when you want to buy a new stock.

Should I buy this stock....or....Should I just pass this stock.

This is common a question for many investors.


The first thing to do before buying a new one is to determine whether your new buy is better than a previous one. If not, then you should not buy it whatever attractive the price is.


Why??? If your new buy stock is not really better than the previous one, then your better choice is to add more quantityof share to your previous one. Take this as example:

You has a Y stock that are willing to give you 6% dividend yield, 15% growth in earning and P/E is around 8. Then, it is Z stock that give 2% dividend yield, P/E around 30 and not really growth in earning. As we can see stock Y is far better than Z. Then, why on earth should we buy a stock Z that are worse than our own stock. That why I say the better choice is adding more share on stock Y.

So, before buy a stock, remember to ask this. Is it better than your previous owned stock or not ? This will screen out 99% of them.

Buying is only a half part of investing. Another half is selling the stock itself. Not many investors are educate themselves with the knowledge of selling. Actually, for my opinion, selling is more important and crucial than buying a stock.

There are two situation when you consider selling a stock.

The first one is when a stock doesn't meet a criteria that you has set earlier. As example: you sell a stock when it prices is 25% lower than your purchased prices. Or, you sell a stock when it's earning is not meet your expectations.

The second one is apply to Warren Buffett earlier years. You sell a stock when you need a more fund to buy a better stock than your previous own. It is when you have more idea than cash. But, for Buffett his problem now is he has too much cash and not to much idea.