Part 5: Process or How the heck do I Invest in Equity Successfully?

5.8 Decide whether to move your butt and act or sit tight?

Once you have found a quality company at a reasonable price should you buy it right away or wait? Is there a way to make this decision? How accurate can you expect this to be? Is there a way to eat the cake and have it too? Just how important is this decision?

When you find a quality company that is fair or under-valued should you invest in it right away or wait?

Maybe in the long term either way will not make much of a difference. However, we are all affected by what happens to the stock price once we buy a stock. If it falls, we get disappointed, maybe even self-critical about our decision. It’s natural and only seasoned investors can ignore it. But if there was a way to make an informed decision on this it would help and you won’t keep wondering about it. A sensible answer to this question can spur us to action when required and also prevent us from jumping headlong.

So, is there a way to assess whether you should act right away or wait?

Well, there is no way to do this that is 100% accurate. In the short term, the price of a stock depends on the supply i.e how many people are willing to sell at that price, and demand i.e how many are willing to buy at that price. When supply is higher than demand on a particular day the price falls and vice versa. Now, if this continues to happen in the subsequent days then we will see a downward trend in the stock’s price.

Of course, it is seldom a case of clear fall or rise day after day, every day. What we are interested in the trend. A moving...........Read More

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