MY MONEY

Why I've been buying falling stocks for 20 years

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I've been buying out-of-favour stocks for 20 years and the pattern of prices falling after I've made my initial purchases is fairly typical.

But for those newer to the market, it can be disconcerting.

As a contrarian by nature, I find it easy to buy a stock as it's falling.

falling stocks

I believe the true value of what I've purchased is higher than what I paid and therefore much higher than the current depressed price.

I stay focused on the longer-term value rather than short-term price fluctuations. In doing so, I'm not overly concerned by falling prices.

But many people feel uncomfortable doing so or, worse, panic and sell out as it goes lower.

Life's too short to learn only from our own experience. So I hope you can learn from my investing insights.

Here are my key tips:

  • Understand the industry and business you're buying into.
  • Ponder risk factors, set portfolio limits and stick to them.
  • Focus mostly on underlying value and market price, not purchase price.
  • Don't panic when prices fall. View it as a potential buying opportunity.
  • Refine your holdings within portfolio limits to tilt towards better-value stocks.
  • Keep costs low. Use competition between brokers to your advantage.

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Greg Hoffman is a non-executive chairman of Forager Funds Management and is an independent financial educator, commentator and investor.
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