Reason for being in the market

What is the single most important item you should consider when making any stock/fund purchase if you are “in the market”? It is simply to understand what is the reason for being in the market. There can be many different reasons for being in the market or not to be in the market, including but not limited to: portfolio growth (very risky), safe growth (not so risky), etc.

This is where you your choices to maintain or grow the balance in your portfolio to ensure success. You wouldn’t want to make a very large purchase only to watch the stock drop several months after taking most of your assets with it, right? Unless you’re a fool who can easily be separated from his assets, I wouldn’t think that you would want to take this path.
Something you should always keep in mind is that almost every stock will go up and will come down over time. Your goal is to determine what your mindset is for the purchase of a given stock, and then see if the purchase makes sense because it is within the range that the stock sells for.

For simplicity you can always use the Bollinger bands to determine if a stock may be a good candidate. An example of Bollinger bands is shown in the graph below. An alternative would be to figure out where the center 2/3 range is (which would be 1/6 less than the top and 1/6 more than the bottom, within the given timeframe such as a month, quarter, or year.

Bollinger Bands for the AGNC company over a 1 year period
Bollinger bands for AGNC

Final thoughts: You must choose your reason for being in the market or lack of reason for being in the market, and those are the choices we all must stand by. Do not believe that you cannot change those choices as both time moves forward, or as your needs change.

This entry was posted in 401k, financial directive, Growth, IRA, Retirement Savings, Roth IRA and tagged , , , , , . Bookmark the permalink.

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