Today, I'm going to single out the pitfalls of acting rashly instead of rationally as you consider your very next investment.
You see, today is the third Wednesday of the month, which means that the next issue of the Motley Fool Rule Breakers growth stock newsletter goes out tonight with two brand-new picks. But I don't want to create a sense of anticipation if you are already a subscriber, or a sense of urgency if you're not.
Don't get me wrong. I think it's important to spot emerging trends early and invest accordingly. I write the Early Adopters Roundup column, which has run monthly in the newsletter since its inception two years ago. I've seen some pretty amazing things happen to portfolios that capitalize on ground-floor opportunities.
Then again, sometimes what appears to be a ground-floor opportunity is actually an elevator heading down into the mineshaft. In other words, you don't need to rush the due-diligence process. No stock out there is going to explode at the open tomorrow and leave you behind if you decide to commit to a little more research, even if you ultimately buy in days, weeks, or even months down the road.
Failure is not an option, though sometimes it's inevitable
If you don't believe me, let's take a closer look at some slam-dunk early-bird specials that proved to be buzzard bait.
Ballard Power
Audible
Sirius Satellite Radio
TiVo
The difference between being early and being too early
Some of the market's biggest winners have periods of surging activity, but it's not as if they became overnight successes. If a stock is truly destined for greatness, you don't need to draw lines in the sand between intraday trading ticks that separate long-term losers from long-term winners.
Even as I look through some of the biggest winners in the Motley Fool Rule Breakers newsletter service, I see that investors didn't have to move in right away to get the best price.
Rec. Date |
Rec. Price |
Gain to date |
|
---|---|---|---|
Intuitive Surgical |
3/16/05 |
$44.17 |
116% |
Akamai |
4/20/05 |
$12.47 |
297% |
Vertex |
1/19/05 |
$10.48 |
306% |
Intuitive Surgical has reinvented the operating table with its da Vinci surgical robotic arm, but you didn't need rock-steady hands to hop on to this lucrative market beater. Twenty-four trading days after it was singled out, the stock bottomed out at $40.15.
Akamai has been the big winner in digital delivery. The need to deliver chunky files quickly and securely has made Akamai a speed demon in business practice and the stock market alike. Yes, $12.47 is a great price, but the stock went on to trade as low as $11.14 just 18 trading days later.
Vertex has been a biotech shooting star, yet it, too, wasn't singled out at its rock-bottom price. Nearly three months later, the shares had fallen by 18% to trade for as little as $8.61 a share.
Dead by 3:59 pm?
So where does that leave you? Hopefully, a bit calmer and a little less trigger-finger-happy. The new issue of Rule Breakers may offer up a pair of scintillating winners -- or more failure fodder for future retrospectives -- but history has proven that "if you act now" is a pretty lame infomercial pitch.
You are more than welcome to check out the newsletter with a free trial pass for the next 30 days, but even that generous window shouldn't instill a sense of urgency in your stock-buying process. I'd even be willing to wager that you will find more value in browsing through the archives of dozens of past issues than concentrating exclusively on tonight's new edition.
Due diligence is all about giving yourself enough time to be confident in every buy or sell decision you make as an investor. Losers can happen at any time. Winners will wait.
Longtime Fool contributor Rick Munarriz actually does enjoy early-bird specials, as long as he's given enough time to analyze the menu. He owns shares in TiVo, a Stock Advisor recommended stock. He is also part of theRule Breakersnewsletter research team, seeking out tomorrow's ultimate growth stocks a day early.TheFool has a disclosure policy.