Guided Tour
 View Your Account
 Shop for Stocks
 Research Stocks
 Educate Yourself
 Family Investing
 Retirement Focus
 Resource Center
 Our Strategy
 About Us
 Helpdesk
 Home
Google Custom Search
 



Archives
Stocks For Sale
Charles B. Carlson, CFA
Contributing Editor, Dow Theory Forecasts

I went shopping this past weekend. I bought some shoes and clothing. I didn't really need the stuff, but the prices were pretty good. In fact, the prices were discounted so much that I couldn't help myself.

That's the typical market dynamic - prices fall, merchandise moves.

Interestingly, those market forces that drive consumers to buy don't often work in the biggest market of all - the stock market.

Indeed, the stock market is the one market where buyers want to buy more of an item the more expensive it becomes. Conversely, the cheaper the merchandise becomes, the more scarce the buyers.

Why the difference in market behavior? One reason is that your successful purchase in the stock market today depends on what the stock does tomorrow and the next day and the next day. A stock is bought for its appreciation prospects, for its future value.

That's not the way it is when you buy a shirt. You know that the shirt you buy today will be the same shirt offering the same value tomorrow and the next day and the next day. You don't buy a shirt because you think it will become more valuable tomorrow. You buy because of the value it offers you today.

Thus, uncertainty is the reason that investors don't treat the stock market like a clothing store - uncertainty over tomorrow's value for stocks.

So how can investors cope with the uncertainty of buying stocks when they are seemingly on sale?

You can control some of the uncertainty by not limiting your stocks to just one. In other words, you diversify. With a diversified portfolio, you are more apt to step up and buy a stock on sale, knowing your entire investment well-being is not riding on this one stock.

In fact, that's one of the unsung benefits of having a diversified portfolio. A diversified portfolio may embolden you to buy stocks that are beaten up, which could ultimately prove rewarding over time.


The BUYandHOLD website contains links to third-party websites on the Internet. BUYandHOLD provides these links to these websites only as a convenience to users of the website. Links on the BUYandHOLD website are not endorsements by BUYandHOLD or Freedom Investments, implied or express, of the linked sites or any products, services or links in such sites; and no information in such sites has been endorsed or approved by BUYandHOLD. Linked sites are not under the control of BUYandHOLD or Freedom Investments, and we are not responsible for the contents of any linked site or any link contained in a linked site. No information contained in the BUYandHOLD website or accessed through any linked site, or any link contained in a linked site, constitutes a recommendation by BUYandHOLD or Freedom Investments to buy, sell or hold any security, financial product or instrument. Information accessed through linked sites is not, nor should be construed as, an offer or a solicitation of an offer, to buy or sell securities by BUYandHOLD or Freedom Investments. BUYandHOLD does not offer or provide any investment advice or opinion regarding the nature, potential, value, suitability or profitability of any particular security, portfolio of securities, transaction or investment strategy, and any investment decisions you make will be based solely on your evaluation of your financial circumstances, investment objectives, risk tolerance, and liquidity needs.

Copyright © 1999 – 2012 Freedom Investments. All Rights Reserved.
Freedom Investments, Inc. Member FINRA/SIPC
Privacy & Security