Before you buy, consider the items in the Buyer's Checklist.
|
Buyer's Checklist |
| Action |
Comment |
| Research the stock. |
Do your homework. Know what you're buying. Feel comfortable about
owning the stock. The stock should be consistent with your investment
plan. |
| Buy on the upside. |
The upside is a winner's game. |
| Don't buy on downside. |
The downside is a loser's game. |
| Use CTM and PDI
to identify upside and downside. |
Use an objective technique rather than a guess or hunch about the
direction of prices. |
| Be careful of buying on price dips. |
Dips on the upside are buying opportunities but dips on the downside
are traps. |
| Don't pay too much. |
Check price charts and trendline. Check P/E
and dividend yield.
Don't chase the stock just because its price is rising. |
| Don't buy at top of bubble. |
Resist the hype and herd mentality. |
| Don't buy on margin. |
A possible financial disaster if the stock price falls. |
| Avoid fad stocks. |
Fads don't last long. |
| Avoid hot tips. |
Act on hard data. |
| Watch for accounting problems. |
Companies with accounting irregularities often are poorly managed
and subject to severe price declines. Avoid them. |
| Ask "Why should I not buy the stock? |
The answer may reveal what's wrong with the stock and why it's not
suited for you. |
| Beware of Wall Street Buy Propaganda
Machine. |
Their purpose is to sell you something. They need your money to
survive. |
| Avoid most managed
mutual funds. |
Most managed funds don't do better than the S&P 500. You pay
fees to the fund to under perform the market. |
| Buy non-managed index
funds or exchange-traded
funds. |
These funds are low fee and track the market or particular sectors
|
