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I was asked on Twitter how I stay calm when the stock market has a crappy day. This piece helps capture my answer to that. Enjoy, and thank you for the question! Please keep them coming by submitting a question here.
Each and every day the market overreacts to news. A report comes out and a stock drops 5%. Another report comes out and a different stock drops 8%.
But is that company reported on now a different company than it was before the report?
That’s the question I ask when I consider buying the day’s hardest hit stocks. If the answer is no, then likely the market has overreacted and the stock is now offered at a discount. One of my strategies is to buy stocks in this manner.
I don’t look at any and all stocks though. I pre-screen stocks, get to know and understand them well, then add them to a portfolio if I like them. From there I watch and see which companies in the portfolio are unjustly punished with news. Over time this builds a quality portfolio of stocks purchased at a discount each trading day.
With other nuances to the above strategy not yet outlined, I have been trading with this particular strategy since 2018.
The overall effect is that I’m buying growth stocks at value prices. Frankly, it’s proven to be a powerful combination over time, and grows more powerful the longer the strategy is used as the growth stocks grow, the value priced buys average and add up, and the portfolio develops.
Thank you for your time.
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