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Investing Tip: Focus on Accumulating Shares

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The stock market is down nearly 7% to start the year. For the first time since 2008 it looks like the bull market will give way to the bear market. I imagine a lot of investors are nervous. I get it. It's scary to see a large loss of money in such a short time.

I try not to look at the money. That may sound silly considering that money is the whole point of investing.

Instead of looking at the money, I try to accumulate shares of index funds and, occasionally, individual good companies. This focus leads me to react differently to a market downturn.

I look at companies as being "on sale." For example, I've been an investor in IBM for almost two years now. I had made money at first, but the stock dipped and dipped. I've been dollar cost averaging into it and accumulating shares. A lot of investors don't like the (lack of) growth at IBM. I like that they've bought back shares an trade at an extreme low 9 P/E while paying out 4.24% a year in dividends. To be able to buy such a company "on sale" is seems like a great opportunity. Wal-Mart is another company that I'm buying at what I feel is a cheap price (by P/E metrics) with a good dividend yield.

I can buy more shares of IBM and Wal-Mart now than I could a year ago. I can buy about 25% more of them on average. I think about using my money to acquire the most shares possible. My money buys me 25% more shares than it did in the past. I'm being careful with how much I put into individual companies, because I remember buying Lucent and Worldcom around 2000. In such scenarios you don't necessarily want to have too many shares.

This idea extends investing in indexes too. Typically index funds are less volatile and unlikely to fall to zero. An example of what I'm doing is buying more shares of foreign stocks and emerging markets through index funds. The strong dollar allows me to buy more shares of these indexes that are beaten up. I'm very confident that sometime in the next 10 years, I'll be very happy to have a lot of those shares and the opportunity to sell some high and buy other assets that are "on sale." I'm not tied to a 10 year timeline, these assets are ones that I'm planning to use in retirement, which may be 70.5 if my other income streams continue to support me.

Warren Buffett is known for saying, "Be fearful when others are greedy and greedy when others are fearful." I think this is the time to be greedy in some areas and that means taking advantage of the timing to own more shares with the same (or even less) money.

Posted on January 27, 2016.

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2 Responses to “Investing Tip: Focus on Accumulating Shares”

  1. […] when your money grows. It's a little more difficult when you watch your money disappear. While I focus on accumulating shares, other people may get nervous and sell. I believe that can be a mistake because it leads to people […]

  2. kev says:

    Excellent work! It just reaffirms what I have be saying that it is time to be going back into the market just because the market is down doesn’t mean you will lose money one needs is to do good research and find a good stock to invest in. The sole reason for this advice is the market being down means there is a lot of potential to grow. Remember research is the only way to get through the market. KEEP UP THE GOOD WORK!

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