I believe it was Shakespeare who once said “all that glitters is not gold” – and boy is it true in the world of investing. As an avid stock watcher and investor I have seen stocks I expected to rise do the complete opposite and fall. So at what point do you stop following the ‘glitter’?
I must first confess that I am by no means a seasoned investor or millionaire. I am still learning valuable lessons each time I trade. However, I do like to think that I have a relatively good grasp on stocks – or at least what you should be looking for when buying stocks. The hardest thing, in my opinion, is separating the glitter from the gold.
Before investing in a stock I always like to perform a personal analysis on a company’s financials. Now I am no mathematical genius (as it probably goes without saying) however I take this step to help me assess whether a company is currently overvalued or undervalued. But this method only takes you so far.
During my short time in the investing world it is clear that the financials of a company can be irrelevant in the rise and fall of stock prices. Which, can I say, drives me completely nuts! But this is the fun of trading.
Recently I have been focusing on announcements and customer confidence in a company on top of my basic mathematical analysis. Which has been working well so far. Investing is all about mass psychology. Which companies can shine (or glitter) the brightest whilst actually being gold will be the ones you need to bet on.
It has become clear to me that the day to day running of a company and the media attention it receives far more heavily impacts it’s stock value than it’s financial status ever will. Finding and committing to a stock which is ‘gold’ and ‘glittering’ is truly hard, but as Warren Buffet once said “don’t buy fair companies at wonderful prices, buy wonderful companies at fair prices”.