Tuesday, June 19, 2007

Strange price movements

Today, AAV and GE both were up over 3% at one point. I thought, "Gee I should sell before they go down," but I stopped myself. Yes, you heard right. I'm already worried about stocks that I've owned for less than 3 months. Some patient investor I am! On the other hand, I did stop myself.

But what is patience? Must a patient man have slow reflexes? I think the most important quality of being a patient investor is to buy and sell based on reason and not on panic.

First of all, with AAV, if I'm up 35% or 38%, what difference does it make? Even if it goes down significantly and I'm only up 20%, is that so bad? I am happy with the stock at these levels and as long as I think AAV can successfully pay that dividend, I will stick with it. I know this will hurt me with AAV because I can see the speculation happening right before my eyes. There's no reason it went up so much in the past week. People are simply gambling that they will raise their dividend or be bought out. New investors are probably getting into the stock in the hopes that it reaches the $20 level it enjoyed not long ago. As a rational investor I want to take advantage of that speculation badly, but as a patient one I will just see what happens. I tell myself, I don't need to make every last dollar; I need to train myself to make good long-term decisions so that when I *do* have a lot of money in the stock market, I won't lose it all.

With GE it's much the same. I have no idea why it moved up today -- none of the recent news seems to justify it -- but I won't let it scare me into selling. I accept that it will probably go down again in a few days. I am in GE long term to make 1000%, not short term to make 3%. Hopefully!

No comments: