Tuesday, 10 May 2016

Should we rush to buy a stock when everybody is buying it?

From time to time, people made mistakes in investing, and myself is not spared from it as well. One of the common mistakes is one tends to buy the stock although the price keeps going up.
Maybe he want to get a slice of the cake which everybody is rushing towards. Maybe decision affected by families or peers when all are recommending it. Or maybe the reason can even be just because he is attached to this stock emotionally. Whatever the reasons it is, we should try our best not to buy it when the price keep going up, or at least this is what I believed in now. Most of the time, the stocks are already overpriced in such cases. It is not wrong by do so, but must do your homework well before making the buy call.
One good example for myself is that I bought Starhub during early of 2015, at around $4.1x. Main reason I bought this stock is because of the dividend yield, quarterly dividend pay out and payout ratio of 90% based on the the past records. The down point is that my dividend yield is slightly less than 5% only, which is consider as low for a dividend stock, but the price had always been more than $4 since 2013. With the psychological effects upon myself, I assumed it would be safe since it had been hovering around $4+ since 2013, but soon after, the price was heavily impacted by the news of the entrant of a fourth telco in Singapore telecom market.
A similar case which I seeing now is SATS. Will it be a multi-baggers stock in the future, or will it become a "trap"? Time will tell, especially when the opening for Terminal 4 & 5 of Changi Airport.

This lead me to have a thought.
Why would there have a long queue at the chicken rice stall? The price keep increasing but the queue only gets longer. Would you follow the queue blindly to get a packet of the chicken rice just because the queue was long? Is the chicken rice nice, or is it still as nice as before? Was the chicken rice over-priced? Or was it because it is the new "in" thing in town?
Of course, may not be neccessary a chicken rice, it's just an example. Ice-cream may work the trick too. ^-^

Ps. I am still holding my Starhub shares, hoping that there would not be a decrease in the dividend payout. *finger crossed*


  1. For food, joining the long queue is seldom wrong!

    1. Yes, I agree, to have a try for the taste.
      But perhaps after awhile, one may think if the food is nice? Is the food worth of the price? Or maybe we shouldn't rush into it, but do some survey(homework) first?