What it means to like a stock

In the age of social media it is common to browse through posts and “like” them one after another without even paying attention to them. The word “like” has lost a lot of its meaning.

So what do we mean when we say we like a stock? It means that it is a possible addition to a diversified portfolio of value stocks, but whether you should buy it depends on a few factors, such as:

Does it fit your needs? Think in terms of risk, growth, income, volatility, etc.

Does it fit your time horizon? As value investors we like to play the long game, but that can change as we get older. If you’re ninety years old you may not want to wait for a bear market to turn around. Or you may anticipate the need to liquidate some of your positions in the short term, for example, if you’re planning to buy a home or send a kid to college.

Is it an appropriate addition to your portfolio? If you already have a lot of exposure to a certain sector or industry (such as tech, pharma, financials) it may not be wise to add yet another stock of that type. You don’t want to be overly concentrated.

Just because we say we like a stock does not mean you should go and buy it. We like a lot of things, but we can’t (and shouldn’t) have everything we like! If you also like what we like, do your research before you decide to pull the trigger.

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