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Articles
Buy This Market
by
Jason Kelly
08/02/2002
At long last, I am back on the website from my
new home in Japan. Thanks for your patience over
the past two months.
If there's anything the stock market is good at,
it must be humorous timing. The bear market
headlines hit their most fevered pitch while I
was unable to update my website to provide any
kind of commentary. The only way I could reach
you, dear reader, was through my email list. If
you're not on it, I suggest taking the required
five seconds to add your name and email.
This market is a buyer's paradise. Don't let the
gloomy headlines scare you out of a good thing.
You should not, of course, take out a second
mortgage on your home or use high-interest
credit card debt to buy stocks, but you should
cherry-pick quality companies at low prices, buy
solid mutual funds, or at least choose an index
to begin a dollar-cost averaging program.
I have a few ideas for you.
First, consider buying Microsoft. It has been fluctuating
in the $40s for the past week or so. I first bought
shares at $50 and have a limit order in for more
shares at $40. The company's business prowess is
legendary. It has continued making money in the
tech sector during this market downturn. Nearly everything
it does succeeds. Not only is it running the front
office and home office of almost every business, it
is making progress toward running the back offices
of large businesses as well. It's even running the
games your children play with its increasingly
popular Xbox. Microsoft has some $40 billion cash
at its disposal. It will not wither away under this
market's pressure and should, in fact, benefit
as its weaker competitors become ham-strung and lose
market share.
Second, consider other stocks that you've always
wanted to own but thought to be too expensive. If
nothing has changed at the company except the price,
put some money in. Some that I've picked up at
recent cheap prices are DSP Group, Exar, and
Celestica. I am also looking at Level 3, made
appealing to everybody lately when Warren Buffett
decided to invest in it -- the first time he has
purchased a technology company. The shares have
already doubled since then, but they are still
under $7.
Third, for the simplest and safest way to buy a cheap
market, look no further than the broad indexes.
I recommend the S&P 500 and the S&P MidCap 400.
If you want more specific indexes, check out
iShares.
I suggest that you protect your sanity and your
money by using limit orders to buy on dips. Don't
buy today, because the chances are good that whatever
you're buying will be a little cheaper tomorrow or
next week. Hence my good-until-cancelled limit order
to get MSFT at $40, not today at $45. I might miss
buying it at that level, but I might not. I don't need
to watch because it's automated. People told me when
it was in the $60s that I'd never see my limit order
at $50 filled. The stock has exceeded my expectations,
to put a positive perspective on things.
If you maintain a dollar-cost averaging program,
by all means keep it going. I would further recommend
increasing your regular contributions during these
months of weakness. Don't worry about fluctuations
in prices of solid investments. Microsoft, certain
mutual funds, and broad indexes will be fine investments
over the long haul. Particularly with an index, you
should just keep the money flowing into it and know
that you don't need it anytime soon and can let the
ups and downs work in your favor.
America is fine. The market is fine. If you can keep
your head and prove that you're a true investor
by BUYING when prices are low, you'll be fine too.
For current quotes on Microsoft, DSP Group, Exar,
Celestica, Level 3, and the S&P 500 and S&P MidCap
400 iShares, click here.
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