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Stocks Worth Buying Again
It's always fascinating to read stories about average, everyday people who built fortunes by regularly investing small amounts over long periods of time.
But you can also get market-beating returns by buying into great companies at more opportune times -- whenever the stock goes on sale. Rather than regularly investing small, fixed amounts, investors can use the simple method of buying a stock in portions to manage risk and boost returns. And now would definitely count as one of those opportune times to buy cheap stocks.
First, find a solid business
Of course, every situation is different, but big returns on investments always come on the backs of fundamentally strong businesses. And if you're confident that you've purchased shares in a great company, why wouldn't you consider buying again, particularly if the stock price is significantly below intrinsic value? Especially in pessimistic markets, fundamentally strong businesses can be bought for good prices.
For large, stable companies, buying more shares when the outlook is bleak can be especially rewarding. For younger, riskier companies, a strategy of acquiring shares in portions is a smart play. It limits your initial outlay and reduces your exposure to significant drops, should the company falter or broader economic conditions change.
Even after a brutal 2008, in which Best Buy lost more than 60% of its value at one point, shares have rebounded over the long haul. They're now up more than 350% from their 2000 low. Even after this rebound, investors with a long-term view still may find great opportunities in stocks that have been beaten down by larger economic conditions that will likely prove temporary in retrospect.
Buy again
Investors who focused on the underlying businesses, rather than the stock prices, were more likely to turn the event into an opportunity.
The final caveat with this method is to ensure that you aren't throwing good money at a truly deteriorating company -- hence the importance of understanding the underlying business.