Tuesday, December 8, 2009

Rule no. 3: It's far better for other to buy an overvalued stock from you, rather than you buy an overvalued stock from other.

My Rule no. 3 states that "It's far better for other to buy an overvalued stock from you, rather than you buy an overvalued stock from other." As mentioned in my post titled "http://lifelongfreedom.blogspot.com/2009/11/investor-traders-and-speculator-charts.html", stock can be undervalued and overvalued as there are traders and speculators in the market.

I value the stock simply by calculating its yield. See my post "http://lifelongfreedom.blogspot.com/2009/11/buying-stocks-based-on-price-and-value.html" If the yield is no longer attractive as the price of the stock goes up, I will sell a portion of it first. If the price goes up again, I will sell the next portion. It will make my investment less risky as I know that I will be holding less and less overvalued stocks and I have free some money to target to buy other undervalued stocks.

Please note that I am adopting averaging down strategy when buying stocks. This will keep the average buying price as low as possible. As for selling of stock, I am adopting averaging up strategy. This is kept my average selling price as high as possible.

If you are interested in my plan for next year, you may click on the below link.
My stock strategy from now till 2010 (Updated on 27 Nov 09)

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