The holiday spirit seems to be spreading to the world’s investors, as several folks have asked me if it’s a good time to buy some stocks they’ve been watching. But with the up-and-down price changes, these people weren’t sure about what price they’d pay.
You may not be able to control the price of a stock, but you can control the price at which you buy the stock. The majority of longterm investors buy stocks with a market order — a request for a broker to buy or sell a stock at the next available price. With this type of order, you won’t know the exact price of the trade until it has been completed.
If, however, your in-depth research leads you to believe a specific price is the right price, then you can place a limit order. A limit order is a request to your broker to buy or sell a certain number of shares of a stock at a specific price. When placing a limit order, you also dictate whether your order is good just for the day, or good till canceled. While some brokerages place a 60- or 90-day window on good-till-canceled (GTC) orders, other firms interpret GTC literally, with orders staying open for extended periods. Make sure you understand your broker’s specific policy or you may end up buying a stock you no longer want, or selling a stock you no longer own.
Because mutual funds are priced only once at the end of each trading day, you can’t control the price at which you buy or sell your shares, nor should you be able to. Remember, with a share of a mutual fund, you aren’t simply buying an investment. You are buying a professionally managed, diversified, long-term investment company.
D. DRUMMOND OSBORN, CFP, is a lifelong LaPortean and Director of Wealth Management at Osborn Wealth Management, a Registered Investment Advisor, where he focuses on investment management, financial planning and trust advisory services. Check him out on the Web at www.osbornwealthmanagement.com or e-mail him your question at drummond@osbornwealthmanagement.com.
