How is the market doing?

imagesOn 24th February I said the market would drop. I was about two weeks too early and, it would seem, the correction down is to be lighter than I first thought.

Many shares have corrected down and are about to bottom out, others are in the process of dropping. Some shares have stayed strong with the occasional one climbing.

You may wonder, if you’re buying for the longer term, why should you be concerned about buying a share at the right price. What does it matter after several years if you bought a few pence higher. And you would be right, over the longer term. A wonderful company is a wonderful company.

However, in the short term, until we get established with the share, a correct buy can be essential for not loosing money. If we get it wrong, but we have bought at the right price (or more importantly at the right phase of the share), then we can more easily limit the damage to our fund. Also, if the market as a whole takes a drop then having bought in the correct phase we again can more easily reduce our potential looses.

This doesn’t always hold true, but at least we will have done our best to minimise our risk. Buying in small chunks (the size of the chunks depends on you and your fund) gives you the chance to get to know the share and possibly leave you with some cash to buy more if and when a share takes an unexpected drop but remains a wonderful company.

Warren Buffett said…..”some things just take time: you can’t produce a baby in one month by getting nine women pregnant”.

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