Friday, June 08, 2007

Buy Stocks Now? - Build Intestinal Fortitude

This is the pull back for which I have been waiting. Three straight days of significant declines in the indexes. Since Monday, June 4, 2007, the Dow, S&P 500 and Nasdaq are all down about 3%. My stock picking system has identified some good buys. It looks like it may be a short term dip. I should be buying like mad.

Well, I'm not buying like crazy. I did make two more purchases, 50 shares each of Terex (TEX) and Potash (POT), at $82.36 and $71.39 respectively. So I have now taken positions in all four stock picks identified as buys on 5/28/07. However, I have currently purchased less than half of the shares that I had intended to buy. What happened?

Emotion versus Intellect

My brain is telling me "buy." The economy is still strong. There is high liquidity. The foreign markets are strong. The four stocks have the strongest buy signals I have seen in the 20 months I have been using the system.

However, my gut is queasy and my emotions say "wait." What if my stock buys go down another 10%? What if this decline isn't a dip, and is the beginning of an extended bear market? What if ...? It's the fear of losing overcoming the potential of predicted gains.

This is a natural occurrence which routinely happens. Systems that look great on paper, tend to look a bit shaky when money is involved. However, if one's system is working (i.e. better than 50% correct), then one should follow the system.

That is exactly what I did yesterday. I followed the system and purchased Terex and Potash. I believe that which ever direction the market goes today, next week or next month, that the stock buys I have identified will do better than the market. So today, I will continue look for an opportunity to add to my holdings for Terex (TEX), Potash (POT), Shaw Communications (SJR) and Avnet (AVT). However, I will be cautious and will add with smaller buy orders than originally planned.

Will my decision to follow the system be correct? I won't know for sure until next week, next month, or even next year. However, at this time, I believe there is sufficient probability to continue to look for buying opportunities.

For more on Reaping the Rewards , check back every Friday for a new segment.

This is not financial advice. Please consult a professional advisor.

Copyright © 2007 Achievement Catalyst, LLC

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