Buying stocks is like buying shoes

My daughter Kayla is a wonderful blogger and an expert shopper.  She recently blogged about her online shoe buying experience.  She found a pair of Steve Madden shoes that she really liked on one of the sites she visits periodically.  Unfortunately, the price was over $100, a little out of her range. She set an alert to notify her of any price reductions.  A short while later, she received an alert of a 50% drop in price.  The price was still too high.  A few days later, the price dropped again.  Nope, she still wasn’t feeling it.  Finally, the site announced that any purchase that was made within the next five minutes could be gotten for $10.  Bang, she bought them!!

After she told me this story, I remarked that she could be a really good investor.  In fact, if she approached the purchase of stocks, bonds and mutual funds the way she buys shoes, she could make a lot of money.

Many of the women I work with initially feel that they are not good at investing.  What they fail to recognize is that they have a lifetime of experience learning how to be smart shoppers.  Often, their mothers and grandmothers have passed along generations of practical knowledge gained in the trenches, in the role of chief purchasing officer for the family.  The trick is to take these purchasing skills for family products and services and apply them to the financial markets.

In many ways, women have the potential to be better investors or “investing clients” than men.  Why?  Imagine, for a moment, going into a food store and discovering that due to severe weather, a particular food item has doubled in price.  Would you still buy the same amount you always do?  Would you buy a smaller quantity?  Or, would you buy a similar product that was selling for a normal price or perhaps was even on sale?  Experience says that most women would forego the purchase of that product that day and/or do all they could to “work around” the problem. Few would say, “Oh well, I will just pay double.”  Yet, this is exactly what many men do every day in the stock market.  All I need to do is say “Apple,” for example, and many would say “buy it” regardless of price.

Why is this example of critical importance?  Because the most basic rule of investing is to “Buy low, sell high.”  The problem is that people often do the exact opposite and suffer the consequences!  Everybody wants Apple at $700, nobody wants it at $400. They want to get into a “hot stock” while it is hot and has often reached its peak, and nobody wants to buy stocks or bonds when they are low, because they are afraid they will just go lower.

So, what is the point?  The stock market is a lot like a supermarket.  Said another way, approach buying financial products the way you’d shop for shoes.  Just because Steve Madden shoes are on sale doesn’t mean that they are inferior. They may not be the absolute latest version, but they are still a Steve Madden, quality product. Use your shopping skills and instincts to look for bargains in the financial markets and to be alert for opportunities to buy high quality investments when they are “on sale.”

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