Be greedy when others are fearful and be fearful when others are greedy.
The most important aspect to investing is knowing when to buy, sell, and when to sit on your hands. The above quotation sums up my investing philosophy and is known as value investing. Value investors actively seek stocks of companies that they believe the market has undervalued and are selling below their intrinsic value. Intrinsic value of a stock is the actual value of a stock, as opposed to its market price. In many cases in the past investors sell shares of stocks in a panic because of the fear of the loss of wealth. Prime examples would be in 2009 when the financial crisis was in full swing and in the dot.com bubble of 2001. During these times stocks are selling at extreme discounts and present investment opportunities of a lifetime. When shares of Coca Cola are being sold off as if no one in the world is going to buy a soda again, its time to start buying shares. An investment in Coca Cola during March of 2009 to present day would of resulted in a 100% return or a 20% return a year excluding dividends. Dividends are a payment made by a corporation to its shareholders on a given date in the future. Also keep in mind Coca Cola pays a dividend and has paid uninterrupted dividends on its common stock since 1893. No one can pick the bottom of the stock market, but investing in a stock such as Coca Cola allows one to collect a dividend payment and wait for the market and price of Coca Cola to correct.Next Week: When to sell and build a cash position.
