First off, what is an Odd Lot? When purchasing stocks institutional investors like BlackRock, Vanguard, qualified investors and many others, will buy in full lots, that is in increments of 100 shares at a time. However, most individual investors don’t have that luxury. For example, even in a market downturn, like the one we are currently experiencing, a full lot of Amazon would cost around USD 182,000, and that is a-LOT-a cash (I couldn’t help myself). So, most individual investors interested in buying stocks will buy Odd Lots (increments less than 100 shares); these people we call Odd Lot investors.
The majority of the information out there regarding economic and market advice is directed at financial professionals like financial advisors and institutional investors. However, during this market turmoil, we don’t want to forget about the little guy or gal.
So, what advice do we have for our Odd Lot friends? First, take a deep breath. Bad decisions are made quickly, so don’t do anything rash. Like Warren Buffet said, “the stock market is a device for transferring money from the impatient to the patient.” Trust your instinct. The stocks you bought because you valued the company. Although your portfolio value has shrunk, realize that you don’t realize a gain or loss until the stock is sold. So don’t sell unless necessary. If you have cash on the side, don’t buy or you may be catching a falling knife. In other words, it could be very dangerous if you begin buying now because there is a good chance that markets will go lower. Wait to buy back in until you see consecutive days or weeks of market growth. Have we hit a bottom yet, no one knows? Although the market is pricing in losses, we don’t yet know the true effect on industries until we begin seeing earnings statements and projected earnings.
Most Odd Lot investors are young, and this means time is a benefit. Continue to save and continue to wait. If you decide that you can buy, remember to buy VALUE not price. And if you have a 401k or IRA, do not touch it. Retirement accounts are meant to be long term. Stick to a set-it-and-forget-it type of mentality when thinking of retirement.
In the words of the rapper Ice Cube, if you are still scared, “Go to Church,” or better yet, talk to a financial advisor. Most of them will jump on the opportunity to give you a free consultation. Just remember, they will probably ask for your business at the end of the meeting.
Good Luck, Stay Healthy, and Happy Investing.
-Harry Forman
Licensed Financial Professional