‘Chickens don’t make money’: fundie

If you ever avoid buying a share because the price has gone up 10% in the past week, then you should stop investing and find another hobby.

That’s the opinion of multiple experts who have warned retail investors about getting distracted about short-term price movements.

“Chickens don’t make money,” Marcus Today director Marcus Padley told his newsletter subscribers.

“If you are the sort of investor who says ‘it’s up 100%, I’ve missed it’, you doom yourself to conservatism… You will never buy a 10-bagger.”

The Motley Fool chief investment officer Scott Phillips said much the same to his newsletter readers this month.

“You reckon the person who bought Woolworths Group Ltd (ASX: WOW) shares at $3, kicking herself for missing them at $2.90, is still kicking herself today, when the share price is closer to $40?”

“What would have been the bigger sin? Missing out on $0.10, or missing out altogether on buying, because your target price was never reached?”

Share market corrections are awesome

Padley said stock market dips are “inevitable and regular”.

“Expect a big one every ten years [where prices tumble 50%], and a tradeable one every three years (10-20%).”

He also noted crashes happen very quickly, but the recovery is often slow. And that leaves plenty of time to buy bargains from a rehabilitating market. 

“It’s a year from the [COVID-19] correction and what we lost in 23 trading days we still haven’t recovered,”  Padley told investors.

“You have plenty of time… to decide when and what to buy. There’s no rush. You never have to catch the knife. The market never crashes up. You do not have to catch the bottom.”

Forager Funds portfolio manager Harvey Migotti last week agreed the volatility in recent weeks has made it a good time to buy.

“We love that volatility because it allows us to buy really good high quality assets at a discounted price,” he told a Forager video.

“Names that have fallen 40% from the highs, for no particular fundamental reason just to kind of get caught up in the rotation.”

Don’t check share prices everyday

If you don’t worry about paying a few cents extra to grab that quality stock, you’d also be advised not to check daily price movements — for the same reason.

“Maybe the shares I bought this morning fall overnight. Maybe they go up. Maybe they close unchanged. I really don’t care,” said Phillips.

“If I’ve bought quality at a decent price, this’ll be the last time I even remember what happened yesterday. The prize is through the windscreen, not the rear vision mirror.”

According to The Motley Fool US contributor Christy Bieber, checking stock prices too often just provokes anxiety and pushes some people into emotional decisions.

“Making investing decisions based on emotion is a recipe for disaster,” she said.

“To make sure you don’t give into fear and make decisions that’ll cost you, don’t even look at the day-to-day performance of the market if it worries you. Instead, spend your time reviewing the fundamentals of the stocks you’ve bought and your asset allocation.”

More reading

• ASX 200 Weekly Wrap: ASX 200 gets its mojo back
• Here’s why the Food Revolution (ASX:FOD) share price jumped 8% today
• Don’t ever buy defensive shares: fundie
• 2 ASX 200 blue chip shares to buy
• Why is the Woolworths (ASX:WOW) share price up 5% in a week?

Motley Fool contributor Tony Yoo has no position in any of the stocks mentioned. The Motley Fool Australia owns shares of Woolworths Limited. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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