Basically, what I do is place a stop, generally 10 to 20 percent below the current price, whenever I buy a stock. The exact level depends on my own analysis of a stock's trading pattern. If a stock violates this stop, I'm out.
Sentiment: NEGATIVE
When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30. You just don't know when you can find the bottom.
If we take care of the business and keep our eye on the goal line, the stock price will take care of itself.
When you raise prices, you've got to make sure you get it to the bottom line. You can fritter it away because of the way you're running the business, with maybe not a totally disciplined approach.
But my system for over 30 years has been this: When stocks are attractive, you buy them. Sure, they can go lower. I've bought stocks at $12 that went to $2, but then they later went to $30.
As a bull market continues, almost anything you buy goes up. It makes you feel that investing in stocks is a very easy and safe and that you're a financial genius.
There's something we calculate called an alpha, and that's the stock's return that's independent, uncorrelated to the market. And the only way you really get a high alpha is for something to zig when the market zags.
I think you have to learn that there's a company behind every stock, and that there's only one real reason why stocks go up. Companies go from doing poorly to doing well or small companies grow to large companies.
Many follow a rule of thumb - no more than 5% in one stock. But that's not the entrepreneurial road to riches.
Never give anyone the advice to buy or sell shares, because the most benevolent price of advice can turn out badly.
Buy a stock at two, have it go to 30. You feel like you're on top of the world.