Why I Don’t Buy Stocks With My Gut

I am all about having my eggs in many different baskets. I invest in Index ETFs, Active/Passive Mutual Funds, insurance products and even individual stocks in my Dividend Investment Portfolio.  The only basket I am missing is a speculation one.  I used to have an account where I did that but I largely ignore it for now.

Over the past 30 days or so I was convinced that purchasing shares of Sprint would be a fantastic idea since they were coming out with the iPhone.  Well I am lucky I procrastinated:

You may have to zoom into the screenshot to see how bad the stock is doing, but needless to say it is down a lot.  Do I believe the stock will rally back? Yes, but I haven’t bought into the speculation basket just yet.  I realize that this type of thinking will prevent large upswings in my portfolio.

It seems that my gut is usually wrong as my tiny and mostly ignored speculation account is down…a lot.  This is the reason I mostly abandoned the idea that my gut knew anything.

 

For those of you who trade individual stocks do you trade on news and gut feelings? or do you just focus on pure metrics?

 

For those of you who may care the reason it is down is that an analyst got into a fight with the CFO during a earnings meetings.  The crux of the argument was that instead of just accepting the rosy news that was being pushed (like this guy would believe lol) the analyst was specifically pushing back as to where is the money coming from to upgrade to handle the new iPhone users.

9 Responses to Why I Don’t Buy Stocks With My Gut

  1. I went with my gut on some recent purchases, and so far they haven’t worked out great but then again most of the market hasn’t either. I’m still confident because the fundamentals are there, and a couple are frequently mentioned on ‘most undervalued’ lists almost daily so I think when the market eventually trends upward, they’ll overperform. They were long term investments, anyways!

  2. I don’t think you can go on your gut, that is a sure way to lose money in the long run. However, even investing in fundamentals nowadays is tough because I feel the market is mainly controlled by speculators.

    I think you have to do a bit of both technical and fundamental analysis and then a bunch of what ifs? Like what if Greece or Italy collapsed tomorrow.

  3. Congratulations! As far as investment, I don’t rely on guts and intuition. It is always best to do the analysis of the market before engaging into any investment.

  4. It’s tough to say that I would be completely unbiased to the news or to my own sentiment towards the company brand. I buy dividend growth stocks and try to stick with the metrics.

    I don’t think I could ever buy a stock on a gut feeling, especially in the tech industry. Here in Canada there is a lot of public opinion on the future of Research in Motion (Blackberry). When there are really strong opinions both for and against, it’s probably best to stay away.

  5. I first base decisions on fundamentals. But I do actually trade on my gut. And sell and buy on it too. I find that when stock is declining and I am happy that I can buy more it is often a very good sign. When I am unhappy – it is often wise to sell.

  6. Only on the metrics. Obviously my own personal relationship with a particular industry/company can skew my opinion of their business, but it’s usually negative more so than positive, so that works out.

    Beating the market at its own game requires some Excel handiwork, the slightest bit of business sense, basic understanding of accounting, and the mental strength not to diverge from what works. If you can do a DCF analysis and not wuss out, you’ll beat the market.

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