Wednesday, December 2, 2009

The Goose That Laid the Golden Eggs

One of my favourite childhood stories is "The Goose That Laid the Golden Eggs". I believe most of you have heard of the story. For those who have forgotten the stories, I have written a summarize version of it below.

The story goes like this: A farmer had found a goose that will lay a golden egg every day. Even though his life is getting better as he no longer needed to do any farming, he found himself not getting rich enough. Due to his greed, he decided to kill the goose thinking that he can get all the eggs inside the goose. Unfortunately, he was not able to find any egg inside the goose. For that day onwards, the farmer grew poorer and poorer as he can no longer find another goose that will lay golden eggs for him every day.

In the stock market, there are many such farmers or investors around who do not know how to value their stocks. Some of the stocks are actually providing a lot of yields or golden eggs every year, but because of a sudden increase or decrease of stock price, they decided to sell the stock away for a short term gain or cut loss. After selling their stock, they realised that the price and the yield of the stock went up even higher. They had decided not to buy back the stock as the price has increased a lot.

My purpose for this post is to suggest that it is good to hold those good fundamental stocks with good yields which are bought at low prices. It doesn't matter that the price movement of the stocks may be slow. What is more important is that these stocks are providing good yield consistently. So don’t try to sell them for a short term gain or cut loss as most of the times the price of the stocks will go up after selling it. You will find yourselves very hard to buy it back at high price even thought it is still a "Goose that laid the Golden Eggs".

2 comments:

ZhuKoLiang said...

one day, the goose falls sick and is not able to lay golden eggs anymore (ie during recession, company don't do well, and don't give dividend)..

U try to sell the goose, but nobody wants... Or only buyers r willing to buy your goose at an ultra low price which u r very willing to sell.

How??

Freedom Achiever said...

Hi,

Sell when you think the goose is overvalued. Buy when it is undervalued. Always look for good fundamental stocks that is very hard to fall.

Regards,
Freedom Achiever

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