Rule #1 Finance Blog

With Investor Phil Town

How the Rich get Richer

I wanted to share a recent comment from Markus and my reply:

“Hi Phil Town, there are two points I still have not yet understood: 

1. When I buy shares at the MOS price I calculated using your tools, when should I rebuy, after having sold them (because of 10-days-line, MACD- and stochastic indicated to sell)? Should I wait for the stock’s price fall again to the MOS-price? This might take a long time of being solely in cash and waiting for Mr. Market to turn crazy again… 

2. Should I buy a stock which has gained 50% and more during the last 6 months in a perfect stable trend but which hasn’t yet reached its MOS price? I fear to buy it at the top at the end of a trend. Thank you for any reply.”

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Phil Town‘s response:

A stock is rising in price and has moved in just 6 months from $20 to $40 per share.  It is easily worth $150 a share.  Should I buy more if I have more money (assuming the indicators or FACs don’t show a big down trend on the way)?  Let’s check the Payback Time (more on that in my new book) because its a great check to see you’re getting a true bargain but assuming that’s okay and you’re still below the MOS (in this case about $75) with the price at $40, of course we’re buyers. This is Payback Time investing stockpiling at its most elemental.  You buy.  You buy more.  As long as I’m selling you $10 bills for under $5 you just keep buying.

This is exactly how the rich get richer.  They have the money to buy when things are on sale.  If you are careful with your money, you will also have the money to buy when things are on sale.  And if you save some each month and Mr. Market cooperates, your wonderful business will still be on sale in a month and you can buy more.

Now go play.

Phil Town