The Investing for Beginners Podcast - Your Path to Financial Freedom Q&A: Selling During Volatility and Visualizing Net Working Capital
May 15, 2025
This discussion dives into the tricky terrain of selling stocks during market downturns, emphasizing strategic management. The hosts unpack the Discounted Cash Flow model, addressing its role in evaluating investments amid inflation. They also clarify the nuances of net working capital and its significance in financial statements. Additionally, concerns about insider stock sales are tackled, providing valuable insights into when such actions should raise red flags for investors.
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Smart Thinning of Portfolio
- Thin the herd by selling stocks that have repeated struggles or losses and are not growing well.
- Avoid multiple simultaneous sell decisions to reduce risk of making wrong choices on both selling and buying sides.
Stay Fully Invested in Downturns
- Stay fully invested during market volatility, especially if you have a long time horizon before needing the money.
- Avoid selling during downturns as markets generally rebound strongly within a year.
DCF Explains Time Value of Money
- A discounted cash flow (DCF) values money today more than the same money in the future because of opportunity cost.
- DCF captures trade-offs involving inflation and growth, reflecting if future cash flows have more or less purchasing power.