This week, I’m talking about 5 mistakes that smart investors don’t make in bear markets.

Today, I’m talking about mistake #4 that smart investors don’t make - buying losers. Yesterday I talked about taking advantage of opportunities that exist in times of crisis. While it’s important to spot opportunities, it’s equally important to differentiate the good apples from the bad apples so you don’t wreck your opportunity-seeking efforts by investing in a dud. 

Here’s what I mean by that...not every cruise ship, hotel chain, and airline will come out from the Coronavirus Crash unscathed. In addition, many of the hardest hit companies that survive a given recession often limp along for years. So you must be discerning in what you buy. 

Cheap isn’t just based on how much a stock has dropped. It’s based on the price vs. value. 

So cheapness is relative. Something is only cheap if the price is less than the value, and the quality is good. Cheap by definition means: “worth more than its cost.”

I have 2 kids and another one arriving in Sept. So I know a thing or two about diapers. The average child goes through 7,000 diapers before they’re potty trained, so I feel like an expert in this area. I’ve tried pretty much every diaper brand and I could tell you the pros and cons of each one...in detail. The diaper brand I love the most is pampers. They’re the best. That’s not my opinion, that’s a fact and I will argue with anyone who insists otherwise. 

But they’re also one of the more expensive brands. If I go to the store tomorrow and see pampers selling for 20 or 30% off, I’m buying more than one box. But other brands go on sale all the time, and if they’re the kind that leak or give my kid a rash, then it doesn’t matter how cheap they are, I’m still not buying them. 

It’s no different with stocks. If a great business is on sale for 10,20, or 30% off, it’s a great buying opportunity. If a bad business is cheap, it doesn’t matter what the price is if it’s bad. 

It’s incredibly important to discern if a company is really cheap, or if the price is low for a reason, so you can stay away from the losers, and tell the difference in quality vs. garbage. It’s not easy to do that though, which is why you hire professional money managers and financial advisors to discern that for you. That’s a big part of the job of an advisor like myself, that you hire. Just make sure your advisor understands what a bargain and what cheap really means.

My name is Ashley Micciche and this is the One Minute Retirement Tip. 

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