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Of Wine and Stocks

Insights

Let’s talk about wine – oh how I know my readers!  Let’s say that on a recent visit to the wine department of your favorite grocery store you notice that they have marked down the price of all the wines by 30% for some reason:  Maybe the Chinese are marking down all their wine.  Maybe the Government is meddling in the pricing of wine.  Maybe the grocery store has had a computer problem.  Who knows and who cares.  Does this mark down mean that you should run home and dispose of all the bottles on your wine rack?  Or, more likely, should you backup your car to the door of the grocery store and load up?  I think you know what to do in this situation – oh do I know my readers.

We all know that over time the price of wine will continue to go up and up.  If we can take advantage of a temporary price decline for any reason and buy our wine for less, that is a gift and we should be ready to buy.

So it is with stocks.  We know that the price fluctuates in the short run based on fear, greed, rumors, speculation and a herd mentality.  We also know that those stocks represent ownership in the great companies of the world.  Companies like Ford Motor, Coke, Verizon and Apple for example.  These companies own factories, equipment, inventory, and brand names.  They employ thousands of workers and they strive every day to make a profit.  They must to stay in business.  And, as a group, these great companies of the world will increase in value over time.  So when the prices of these stocks occasionally get marked down temporarily for some short-term reason we should rejoice and back the car up to the door.

We should be accumulating as many shares as we possibly can at these marked down prices knowing that they, and everything else in our lives, will cost more in the future.

So when we see the news of the market down for the day, or week, or month, rejoice in knowing that your monthly contributions to your retirement plan are buying more shares while they are temporarily on sale.  The time to buy is when you have the cash.  And the only time to sell is when you need the cash.  Now let’s all relax and enjoy a glass of wine.