One of the more difficult tasks when investing is determining an entry point. You don’t want to buy a stock when it’s near its all time high, yet you don’t want to miss a solid run up in the stock’s price. If you have a list of potential buys, then you can probably reduce the chances of you either making a bad decision or being stuck in investor paralysis.
Having a list of stocks you’d like to buy will help you not fixate on one stock. If everything depends on one stock, then you lose control. You put yourself in a position where you live or die by what happens. This will surely force your hand and make you enter at a time when you’re uncertain. Options enable investment flexibility.
When you craft a list of stocks you’d buy, you provide your mind with options. You don’t trap yourself into a corner. If one stock has went on a run and you think it’s gone up far too much, you can look elsewhere. When you have options you can pick your shots.
One way to pick your shots is to look for companies with a proven track record, that are financially sound and are producing product or services that people demand and will continue to demand in the future. Consider John Deere (DE). DE is a leader in farm-agriculture equipment. It’s the gold standard in tractors. People throughout the world need such equipment because people continue to want to eat. It’s a strong and viable company with solid growth prospects in the future.
DE recently came about 20 cents from hitting $100 per share. It has now dropped back into the mid-80’s. You’re seeing a correction happen in the stock. Investors are taking profits, people are reallocating their holdings. Over a 15% drop in the price of the company has occurred.
If you had a your wish list of stocks and DE was on that list, the recent pull-back in price might pose a good opportunity for you to establish a position. You’d obviously want to look at the company and the macro environment, but you’d be able to pick your spot.
The bottom line is that you should not become over-infatuated with one stock. You’re the master, not the stock.