To succeed at investing is not as difficult as it may seem.In fact, the common "buy low, sell high" wisdom might actually be preventing you from reaping the full potential of the best companies in your portfolio.
The best investors generally adhere to a few basic principles to outperform the market and generate life-changing returns. At The Motley Fool, co-founders Tom and David Gardner have been successful both by identifying companies with sustainable competitive advantages and by buying and holding stocks for the long term -- which eliminates the need to show consistently positive results on a quarterly basis.
Image source: The Motley Fool
One of the Gardners' key investing philosophies is that investors should add to their best-performing holdings rather than trim them. This may sound counterintuitive since conventional investing strategy teaches investors to rebalance their portfolios by trimming positions in winners and adding exposure to underperforming sectors.
Successful businesses tend to succeed for a reason. Therefore, stock market winners are more likely to continue to win. When Motley Fool investing services such as Motley FoolStock AdvisorandMotley Fool Rule Breakersre-recommend buying a stock, it's called a "double down buy alert."
What is it?
What does a double down buy alert indicate?
The double down buy alert indicates that a Motley Fool investing service is recommending a stock for the second or even third time. This is a sign that the analysts are so bullish about the stock's future that they suggest buying it again, even at a higher price, essentially encouraging investors to double their holdings of the stock. The double-down signal often indicates that the stock is one of The Motley Fool's top stock picks, but the alert is distinct from others like The Motley Fool's ultimate buy alerts, which are issued when both Tom and David Gardner recommend the same stock.
The Motley Fool has recommended doubling down on only a few stocks, so the alert is one of the strongest confidence signals investors can receive. Among past recipients of double down buy alerts are Amazon (AMZN -1.6%), Netflix (NFLX -1.49%), andTesla (TSLA -3.55%) -- all companies with stock prices that have skyrocketed over their histories.
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Strategy
Double-down stock trading strategy
There are a number of benefits to the double-down trading strategy. First, the best stock to buy is often one you already own. While it's important to diversify your portfolioby owning at least 15-20 stocks, the stocks you already own tend to be the ones that you understand the best. Therefore, you can more easily capitalize on opportunities that arise when the stock is unusually cheap or when it loses value due to short-term reasons like simply missing earnings estimates.
The other reason why the double-down stock-buying strategy works is because winners tend to keep winning. While it may be tempting to add to your losers with the hope that they'll gain substantial value, you're better off selling your losers and reallocating that money to your winners. Past performance isn't a perfect indicator of future growth, but it's one of the most reliable signals available. Companies that outperform generally do so because they are better managed, can create and retain competitive advantages, and are implementing disruptive strategies.
How to take action
How to take action on The Motley Fool double-down stock yourself
When The Motley Fool issues a double down buy alert, our analysts are encouraging investors to buy more of the stock, assuming they purchased it the first time it was recommended. While you don't have to double your ownership of the stock, historically it's proven profitable to add to your portfolio additional shares of the recommended company. A double down buy alert doesn't necessarily mean that the stock is expected to double in price, although there's a good chance it will, especially since Stock Advisor tends to issue double down alerts for only the most promising growth stocks in the market.
The Motley Fool encourages investors to take control of their own portfolios, so you'll have to make the decision for yourself whether to buy the doubly recommended stock and also decide how much of the stock to buy. However, the track record of Stock Advisoris clear. The investment advisory service has outperformed the S&P 500 (SNPINDEX:^GSPC) by a factor of nearly five since its founding in 2002. In other words, history shows that when The Motley Fool gives a double down buy alert, it's probably a good idea to follow that advice.
John Mackey, former CEO of Whole Foods Market, an Amazon subsidiary, is a member of The Motley Fool’s board of directors. The Motley Fool has positions in and recommends Amazon, Netflix, and Tesla. The Motley Fool has a disclosure policy.
FAQs
"Double down buy alerts" from The Motley Fool signal strong confidence in a stock, urging investors to increase their holdings.
Does Motley Fool tell you when to buy and sell? ›
While a major component of the investing philosophy is to let winners run, they will send you an alert if they ever think it's time to sell. Worth noting: The Motley Fool doesn't try to time the market – the investing philosophy is to buy-and-hold through ups and downs in the market.
What are The Motley Fool 10 best stocks? ›
The Motley Fool has positions in and recommends Alphabet, Amazon, Chewy, Fiverr International, Fortinet, Nvidia, PayPal, Salesforce, and Uber Technologies.
What is the double down strategy in trading? ›
The "double down" strategy requires that you throw good money after bad in hopes that the stock will perform well. Fortunately, there is a fourth strategy that can help you "repair" your stock by reducing your break-even point without taking any additional risk.
What does "double down" on a stock mean? ›
The double-down strategy is a stock trading strategy that entails adding another position to a losing trade, with the hope that there will be a reversal to help recover the losses. It involves doubling your position when the stock price falls in order to improve your average order entry price.
What is the 3-5-7 rule in trading? ›
The 3–5–7 rule in trading is a risk management principle that suggests allocating a certain percentage of your trading capital to different trades based on their risk levels. Here's how it typically works: 3% Rule: This suggests risking no more than 3% of your trading capital on any single trade.
What is the best day of the week to buy stocks? ›
Timing the stock market is difficult, but understanding when to trade stocks can help your portfolio. The best time of day to buy stocks is usually in the morning, shortly after the market opens. Mondays and Fridays tend to be good days to trade stocks, while the middle of the week is less volatile.
What stock will boom in 2024? ›
10 Best Growth Stocks to Buy for 2024
| Stock | Implied upside from April 25 close* |
|---|
| Alphabet Inc. (GOOG, GOOGL) | 12.2% |
| Meta Platforms Inc. (META) | 22.3% |
| JPMorgan Chase & Co. (JPM) | 11.2% |
| Tesla Inc. (TSLA) | 23.4% |
6 more rowsApr 26, 2024
Warren Buffett's stock purchases in the most recent quarter include Chubb Limited (CB) and Occidental Petroleum (OXY). HP Inc. (HPQ) and Paramount Global (PARA) are among Warren Buffett's stock sales in the most recent quarter. The Berkshire Hathaway portfolio includes 41 stocks as of May 2024, including Apple Inc.
What is Motley Fool's all in buy alert stock? ›
We regularly see similar ads from the Motley Fool about “all in” buy alerts, sometimes also called “double down” or “five star” buys, and they're generally just the type of steady teaser pitch that they can send out all year, over and over with no updates, to recruit subscribers for their flagship Motley Fool Stock ...
Internet connection required to play. DoubleDown Casino is intended for players 21 yrs+ and does not offer “real money gambling” or an opportunity to win real money or prizes based on the outcome of play. Playing DoubleDown Casino does not imply future success at “real money gambling.”
What is the best number to double down on? ›
When You Should Double Down
- When the total of your cards equal 11. This is by far the most popular and well-known time to double down in blackjack. ...
- With a hard 9 or 10. ...
- When you are showing a soft 16,17 or 18. ...
- When The Dealer Has An Ace. ...
- If You Have A Hard Hand That's Higher Than 11.
Things You Should Know
Doubling down is making a bet equal to your initial wager after being dealt your first 2 cards. You only get dealt 1 more card and cannot hit. Double down if your cards total 9, 10, or 11 without an ace. You can also double down if your cards total 16, 17, or 18 when you have an ace.
Is it good to double down? ›
If the dealer is showing a lower card than a 10, it is good strategy to double down. If the casino rules dictate the dealer must hit soft 17, you should always double down on 11 no matter what the dealers up card.
Why is it called double down? ›
In blackjack, "doubling down" corresponds to an action in which you double your bet, with the possibility of winning big. The downside is that you also risk losing twice as much as you would if you don't double down.
How do you know when to buy and sell shares? ›
The Most Favourable Conditions. The best time to buy stocks is when the share prices of a given stock are at a low. There is always a chance that they will drop even further, but buying at a low price is significantly safer than buying at a high price where the price of the stock is unlikely to climb much higher.
How do you know when to buy a stock and when to sell it? ›
The idea is to buy stocks when they're undervalued, then sell them when they're eventually worth more. There are two popular ways to measure the value of a stock: Relative valuation: This looks at how a stock is performing when compared to its competitors.
How do you predict when to sell a stock? ›
Many investors use price targets to determine when to sell a stock. Investors that use the strategy typically will determine a price range for when to sell the stock at the time of purchase. As a stock price rises, investors can begin selling the position once it reaches the price target range.
How do I know when to sell my stock? ›
When to sell a stock: 7 good reasons
- You've found something better. ...
- You made a mistake. ...
- The company's business outlook has changed. ...
- Tax reasons. ...
- Rebalancing your portfolio. ...
- Valuation no longer reflects business reality. ...
- You need the money. ...
- The stock has gone up.
