Monday, July 13, 1998

A Great Stock-Timing Strategy
By Kevin Stefan [email protected]

I've read a lot of investment books over the years. Many of them were complete garbage. A few were OK. And some had the word Fool on the cover. I got this stock-timing idea from one of the OK books, but it's one I rely on.

The next time you want to buy a stock, get out your stopwatch. Put away your spreadsheets, your financial pages, your newsletters, and even the trusty Fool. Just you and your watch. (I did this while I was doing the dishes.) Start the stopwatch, and start explaining why you want to buy the stock. Explain at a simple level, one that would satisfy your grandmother who thinks that term deposits at the bank are risky investments, preferring the savings account. (Or if you don't have a grandmother like this, explain it to satisfy my Granny.) Once you have described the major reasons you want to buy the stock, stop your watch.

Look down at your watch. What is the elapsed time? 5 minutes? 5 seconds? If it's between 30 seconds and one minute, buy. Otherwise, think more carefully. You'd be surprise how well this works.

How does it work? Well, if you take less than 30 seconds to explain, your explanation is probably something like "Well, my broker told me to. And this Wise guy on TV said it was going up. I think it has something to do with the Internet." If you can explain a good company, how it operates, how it's positioned in the market and what it's strengths are in under 30 seconds, you probably work at an auction.

If, on the other hand, your explanation takes over a minute and is peppered with how the sunspots and industry cycles are going to affect the Return on Equity, which was depressed by El Nino, leading into an alpha-wooden-shoe-wave formation, you're probably stretching your reasons. Of course, some people are so in love with their stocks that they go on for hours about the minutiae, but you're not a boring stock geek. You're a regular person. Just the facts, ma'am.

Hey, it works for me. I think it's 30 seconds well spent. Now if I can only get my Granny to start reading the Fool...

Okay Fools, that's our story. If any of you would like to hear more, please e-mail me at [email protected]. I would gladly share the dirty details with you.

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