Investing – What Do You Really Know When You Think You Know?

in Stocks

What do you really know when you think you know what stock to buy and when to buy it?

Really. How deep do you go into understanding the fundamentals and predictable future trends – based upon currently available data – when it comes to picking a stock?

Are you even clearly aware of the assumptions you are making or that are built into your stock pick and its timing?

Can you list those assumptions? Have you? Have you taken a few minutes, an hour, a few hours spread over a few days to mine for data, evidence, hints, clues as to the wiseness of your market timing “for the sector” or stock?

Do you pick stocks like fund managers pick stocks? Do you even know the process fund managers employ or do you believe that a monkey with a handful of darts could make an equally valid selection?

How many darts would that monkey need and over how many years and in what economic climate?

I admit that I have not been vigorous in my research and analysis. I admit that such an approach has cost me money.

I admit that I have engaged in all manner of misguided investing: market timing, failing to adequately research a company, et cetera. It is true that one learns by experience IF one lives to learn. In the world of investing, with limited funds, many have not or have been relegated to the “bunny slopes” of the investment world.

So, how does your research and your approach to research stack up to the pros? Have you examined yourself and your practices lately?

And told the truth about your investing shortcomings and failures? And written them down? And posted them on a wall next to your PC or taped them to the back of your Ipad.

Once again I have engaged in a bit of predictive market timing. I have invested in the oil and gas sector. It’s not my favorite, from a personal philosophy perspective, but I was sitting in cash on the sidelines and thought that wasn’t the brightest of positions either. So I searched, researched and waited for what looked like a stable low.

Then the price for crude oil dipped even lower.

As did the stockmarket valuations for Exxon-Mobil (XOM) and British Petroleum (BP) – the two stocks I picked for their record of dividend paying – which can also be an indicator of who holds their stocks, how likely it is that stockholders will continue to hold and therefore how stable their stock prices will remain.

Well, energy stocks tend to be cyclical, so now I have my options: sell, at a loss, or ride out the cycle.

For now I’m collecting dividends and looking deeper into the world of energy investing.

Maybe if oil prices weren’t tanking I’d be taking a harder look at investing in alternative energy sources but, for now, lower oil prices – which haven’t entirely translated into lower gas prices – appear to be putting a damper on the market’s enthusiasm for alternative energy stocks.

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