How to Invest When a Stock is at an all Time High

Occasionally we all have these ideas of what we think the next big company to invest in is. Whether we do our research on the company or we just really like the company (I'm talking to all you Apple fan boys out there!). Sometimes there's just no talking us out of the "need" to invest in this company.

So, you know what you want to invest in, but this company is a real momentum stock. It seems like it's always at an all time high! I don't want to buy it when it's stock price has never been higher so what do I do?

For me, right now I have one of these dilemmas. I have been following this company NXP Semiconductors (NXPI) for a while now. I they use a lot of technology that has a lot of potential to grow over the next few years. They have a lot of radio frequency technology which is used in TV's and most remote controls of any kind. Perhaps you've also heard of near frequency communication (NFC) technology, that's the same thing. It is seeping it's way into many facets of our lives such as: my bus pass, some credit cards, smart phones, and even parking meters!

MasterCard uses this with their "Tap and Go" system and Visa has their own system called "Paywave" where you just holding your credit card near this scanner instead of swiping it (I honestly don't know how that saves time... Seriously, it's the difference between 2 seconds and 5 seconds...)

I think this technology has a lot more ground to gain and this is one of the biggest companies in the field which is why I like it. Anyways, I have been wanting to buy this for a while but let's take a look at their stock chart:


NXP Semiconductors - NXPI

For the past year NXPI has almost constantly been at all time highs. Normally I would wait for some sort of pull back to enter but I haven't really had the opportunity. So, since I still believe in this company and obviously the market does too, I feel like I need to find a way in.

It's such a simple concept that you always hear, but it's so hard for me to practice (outside of my regular 401(k) contributions), it's called dollar cost averaging. Which is just buying consistently at intervals, regardless of if the stock is up or down.

So I'm going to start by establishing a small position in this company, after a little while longer, if no news on this company has changed my mind on why I want to own this stock I will add to my position.

Disclosure: I do not own NXPI as of this writing but plan to initiate a position soon.

4 comments:

  1. Dollar cost averaging into a stock at an all-time high is a great way to go. That's actually what I did with Apple years ago, just dipping my toe into the waters a little at a time. I set a total dollar amount I wanted to invest in the company and split that amount up into four total trades over the course of maybe 18 months.

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    1. It seems like with growth/momentum stocks you really have to practice dollar cost averaging. For dividend stocks I'm a little more selective with where I enter, since they aren't growing at amazing rates anymore I usually wait for the right opportunity to present itself.

      Thanks for stopping by Brian!

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  2. The DCA approach is one of my all-time favorites. Took me some time to dive in and understand how exactly it works, but it almost cured my fear of losing money. Investing is a risky thing, bust DCA makes it a bit less worrisome.
    Huge thanks for sharing your example!

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  3. Sometimes market also remains overvalued for longer period; it is also possible that it may not correct much but may remain in a narrow band of a couple of hundred points in absence of support from corporate earnings, slow pace of economic reforms or uncertainty in global macro-economic factors.

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