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Author: xerohype Big red star, 1000 posts Old School Fool Add to my Favorite Fools Ignore this person (you won't see their posts anymore) Number: of 24764  
Subject: LTBH III: Jumping into the Market Date: 9/26/2000 2:27 PM
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LTBH III

Jumping into the market


by xerohype

Ok, you've selected some good prospects, now what do you do? Fear and greed, fear and greed, is the stock too high, will it ever go down?

We all struggle with these questions and emotions. There are no easy answers, and if you have a sure-fire market timing method, please do let me know.

There are some methods to jump into the market without getting too hurt.

The first one of these is to dollar cost average (DCA). this is a technique I use (and one that Fisher mentions in his book). You find a stock you like and you decide how much you ultimately want to spend on it, then you divide your money into portions and you spend it over the next few months, with some luck you can take advantage of dips (Naz goes down > 100 points) to buy and thus reduce your buying price. You can also DCA blindly by buying on a given day of the month.

I have a small account with www.buyandhold.com and they provide a great service for pseudo-Dripping with a low commission ($2.99). Check them out.

You can also decide to make a huge buy from the beginning, in this case you might want to try to take advantage of big market dips (although at the time you never know when the bottom is), or use some technical analysis (TA). TA reads the price chart together with the trading volume to help you decide a good place to buy or sell stocks. TA doesn't always work, but some people find it very useful for timing buy points, especially in very volatile markets.

Here are some TA resources:

Clearstation Education
http://www.clearstation.com/education/cover.shtml

"The Visual Investor: How to Spot Market Trends", by John J. Murphy.

Stockscores.com School
http://www.stockscores.com/school.asp?component=school.asp

The object of TA is not to get you the absolute bottom but to try to predict good entry and exit points. TA fits with LTBH investing by allowing us to pick good points to plan buys for our selections. Your entry point will determine your final return, but it's important to not get greedy and fight for an eighth of a point and to miss some great stocks. Fisher mentions this and I've lived this a few times. I've missed some great stocks by 1/16 or 1/8 because I put in a limit order and it missed by that much (AAPL in Feb. 1999 at about $17 split adjusted and RNWK in Oct. 1998 at $11 split adjusted), those 1/8ths don't seem so important now!

Another similar technique to find strong stocks is O'Neil's CANSLIM method, see these resources:

dbphoenix's website, DB's Burrow
http://home.talkcity.com//MoneySt/dbphoenix/DbsBurrow2.htm
CANSLIM FAQ by dbphoenix
http://home.talkcity.com//MoneySt/dbphoenix/WorkshopD.htm

"How to Make Money in Stocks" by William J. O'Neil

Personally, I try to wait patiently for market drops to pick up bargains. If there is a really great stock I like, I will not wait and I will jump in with at least a partial buy.

Hopefully some of these methods will help you grab good buy points for your LTBH stock selections.

-xerohype
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