Well, I did it. I bought shares today

Want to know why I was buying today? Here's my simple answer…

a woman

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More

sdf

Well, I did it.

wrote yesterday that I was planning to buy shares today.

And, while I gave myself the (legitimate) 'out' of not absolutely promising to do it, I went ahead.

Why?

Not because I knew this was the bottom for stocks.

For all I know they'll fall again tomorrow, Friday and all next week.

Or, they'll rise.

Not much of an 'expert' am I?

Depends how you define it.

See, the 'experts' said there'd be a double-dip recession in 2010.

The 'experts' at RBS said 'Sell Everything' in 2016.

The 'experts' at Goldman Sachs said the US market would rise 7% in 2019. They were only out by a factor of 4.

Pundits, as John Kenneth Galbraith noted, "forecast not because they know, but because they are asked."

Which raises (or should raise) the question: If you don't have a forecast, how can you know it's worth buying shares?

A 'forecast' implies a target. Some expected, measurable event at some future point.

That's how we get some people issuing 'price targets' for shares, and 'year end targets' for the ASX (among others).

Me?

I have no idea where shares will be by year end.

Because share prices, in the short term, are a measure not of value, but of popularity.

I've seen enough reality television (which, by definition, is any amount of time above zero) to know that predicting human behaviour is a thankless and all-but impossible task, at least in the short term.

But in the long term? Ah, that's a different kettle of fish.

Want to know why I was buying today?

The simplest answer I can give you is "I think today's share prices undervalue the long term earnings power of those businesses".

Think Coronavirus is going to permanently damage a business? You'd better pay less for the shares.

Think Coronavirus is serious, and disruptive, but its effects will be transitory? Great; take advantage of others' pessimism and buy!

That's what I did today.

Not because I knew share prices would automatically and suddenly start rising tomorrow.

And not just because share prices were lower than at some point in the past. After all, plenty of companies' shares fell… then fell… then fell, never to recover. Buying just because prices are down is silly.

But I bought because I expect the prices I paid, for quality businesses, will be attractive when viewed against the long term profit-generating potential of the companies whose shares I bought.

They might go down further in the near term.

Or not.

I have no idea. Neither do you.

And it really doesn't matter.

What matters is what the company is worth over the long term.

And it's not just me saying that. I'll leave you with a couple of quotes. The first is from wildly successful US fund manager and author, Peter Lynch:

"I don't believe in predicting markets. I believe in buying great companies — especially companies that are undervalued, and/or under appreciated."

And from Warren Buffett:

"I am not in the business of predicting general stock market or business fluctuations. If you think I can do this, or think it is essential to an investment program, you should not be in the partnership."

He wrote that in 1966, by the way. Long before his phenomenal multi-decade investment performance made him the greatest investor to have lived.

Today, I narrowed my search down to a few companies that are attractively priced, compared to their long term future earning potential.

So I bought them.

Investing doesn't need to be any harder than that.

Fool on!

Motley Fool contributor Scott Phillips has no position in any of the stocks mentioned. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

More on Motley Fool Take Stock

Man holds young girl out in a flying motion as mum watches on, all in front of a motorhome.
Motley Fool Take Stock

My 'going on holidays' investing strategy

Some (early) holiday reflections...

Read more »

investing and camping analogy represented by camp side next to ute
Motley Fool Take Stock

What the bush taught me about investing

Bushcraft basics for intelligent investing.

Read more »

Businessman lying on the grass and looking at the sky.
Motley Fool Take Stock

The ASX is closed. Now what?

Aesop’s advice for investors.

Read more »

Cubes with tax written on them on top of Australian dollar notes.
Motley Fool Take Stock

The new Super tax is a bad tax

There are three problems.

Read more »

Warren Buffett
Motley Fool Take Stock

End of an era: Buffett to step down

The Oracle of Omaha will end a 60 year reign.

Read more »

A woman sits in a cafe wearing a polka dotted shirt and holding a latte in one hand while reading something on a laptop that is sitting on the table in front of her
Motley Fool Take Stock

Motley Fool TV LIVE and FREE at 8pm AEST

Applying the Pareto Principle to your investing.

Read more »

A person holds strong behind their umbrella as they weather the oncoming storm.
Motley Fool Take Stock

Are you ready for today's falls?

ASX futures suggest that we’ll drop by a bit over 4% today.

Read more »

A financial expert or broker looks worried as he checks out a graph showing market volatility.
Motley Fool Take Stock

An antidote to market meltdown mania

We're LIVE and FREE on YouTube soon.

Read more »