A very easy method to buy stocks is to use the cycles of the stock market which means when stocks decline in value you begin to look at them to determine if you will buy them and watch as they begin to rise in value on the upside of the cycle. You will hear or read – a buying opportunity, but since most of us do not have unlimited funds we pass on the overwhelming majority of buying opportunities. For the simple reason – it takes research to determine if something is a buying opportunity or not. Jennifer Dowty in an article called Price weakness: to buy or not to buy? outlines the research you typically need to do before you decide to buy.

If you have limited funds, one thing you can do is something like a foundation the writer sits on – it generally does nothing for 6 months or more unless a stock reduces its dividend. Use time for yourself – there are always buying opportunities.

Back to Jennifer’s comments – if and when a stock falls on a day to day basis – first you need to research and assess. Why is the stock falling? is it the entire group? the market? or the stock? If it is the stock – go to the company’s website and read their press releases. Company’s investor relations group needs to write something to explain why the fall in prices. Sometimes it is related to management changes; sometimes to negative reports; sometimes it is related to consumer perceptions or a new government policy but there tends to be something.

Having researched the company, now you can see what the market thinks – is the volume of shares increased? if the company is tied to a commodity – what does is the commodity price doing or not doing?

Eventually you come up with a reason for the decline, then you need to determine is this a long-term reason or short-term. If you determine it is long-term look at other alternatives. If the weakness is short-term and you are very interested in the stock consider nibbling or buying some shares to watch carefully. if you have determined the decline is only connected to the quarter, as the price begins to increase you can buy more and still make heathy profits.

Linking to dividend paying stocks, there are enough dividend paying companies that some will go through cycles, but even if you are wrong and the price declines you are still receiving a dividend. The dividend protects you because one of the rules of investing is not to lose money, try to make it. Staying with dividend paying companies limits the risk.

There are more questions than answers, till the next time – to raising questions.