Know When Not to Buy a Stock

Many articles on buyupside.com urge you not to buy a stock. This approach may seem too negative for some readers, but it is intended to help you avoid losing money. Early in my investing career I (Richard Howard), often bought stocks on the price downside because I thought that I was getting a bargain. But in most instances I later regretted my decision. I usually incurred unrealized losses as prices declined. So I was forced to sell for a loss or wait out the price decline and hope that the stock moved to the upside. In the meantime my money was tied up and I was an unhappy investor. Now I avoid buying on the downside because I understand that most buy and sell opportunities lose money while prices are declining.

A second mistake that I used to make was chasing a stock as its price increased. Time after time I paid too much for a stock as it neared a top. Once I called my broker to buy a silver mining stock that was shooting up in price. He said that he was just about to call me to advise me to sell my shares because the stock had run up so quickly. I ignored his advice and instead I bought more shares. And almost immediately the stock tanked. He was right and I was wrong.

Before you buy a stock or any other investment, always ask, "Why should I not buy this investment?" Look at its price chart to determine if it is on the downside or near a top. Be patient and let the stock price come to you. Avoid buying while prices are declining or paying too much near a top.

Remember that deciding not to buy is as important as deciding to buy.

Related Articles:

buyupside.com Articles About the Price Downside
buyupside.com Articles About the Price Upside
The Wall Street Buy Machine

Posted March 20, 2007.