How To Truly Monitor Your Stocks
Regardless of whether you choose to monitor stock prices daily or not, focusing on deeper details of the business rather than the daily stock price will put you on a greater radar to know if such investment is worth your time or money.
Buying and selling of stocks is not usually an easy task. This is why different people have tried to look for alternative means to monitor the market to know when stocks hit certain prices and benchmarks to enable them decide whether to buy or sell such stocks.
The famous author Thomas Phelps, in his book, 100 to 1 in the Stock Market, tells the story of a businessman who sold his companies and invested the proceeds in the stock market. He told Phelps that it was driving him crazy to watch the fluctuating stock prices every day and didn’t know what to do as the stocks he bought went down and the ones he didn’t went up, and the whole experience was giving him sleepless nights.
Phelps went further by asking him questions on how he analyzed the companies he had acquired before selling them off. The businessman said it was easy, and stated that as long as sales were rising and profit margins were good, he knew the business would be fine and it didn’t cause him a moment’s concern. He couldn't see a price for the businesses every day, so he focused on how the business was performing and not necessarily its current price.
Phelps pacified and advised him to manage his stock portfolio the same way by focusing on the quarterly reports and the progress of the business and ignore the daily price turbulence. This would allow him to achieve similar results with peace of mind.
In this light, it is advisable for investors to manage their portfolios in the way Phelps suggested. During the quarter of each year, companies usually release their financial information, and investors should focus on what is going on with the business and less attention on the daily price fluctuation.
Each quarter investors should take out adequate time to study the earnings release of their holdings and ask some basic questions. For example: Are the sales growing? If not, why not? Are earnings higher than they were in the previous quarter? If not, why not? Has the company issued new shares of stock or incurred increased debt levels?
It is wise for Investors to also examine management's attitude towards their shareholders. Is the company paying a dividend? Has it been increasing over time? Rather than focusing on temporary price fluctuations and daily market activity, investors should consider how the business itself is doing. If the company is growing and profit margins are stable, then you can comfortably hold the stock. If the company is doing well and the stock is down, you might want to consider buying more shares. If, however, the business is struggling and you can find no valid reason that it will improve anytime soon, then it's time to think about selling the stock regardless of its current price situation.
Regardless of whether you choose to monitor stock prices daily or not, focusing on deeper details of the business rather than the daily stock price will put you on a greater radar to know if such investment is worth your time or money.