Is it Better to Buy Stocks When they are Up or Down?
When you are putting money in the stock market, you are bound to wonder and wander over several factors. This is natural – in fact, it is your hard-earned money, and you need to be patient, kind, and careful with it. Most of us cannot afford to lose a lot in the process of earning more – that is why we need suggestions, advice, support, and, most importantly, solutions. One such wandering of the mind is when to buy stocks. When is the perfect time to purchase stocks from the stock market? That is right. Suppose you knew why you would be here. So, let us talk this through and together. Let’s talk about the perfect time to invest in the stock market.
First things first – let us understand when not to buy a stock or invest in the stock market.
When to Not Invest in the Stock Market?
Before you jump right into top stock volume today, the best performing funds and choose to invest in them, you will have to know when is not the time to invest in the stock market.
Okay, so here is a thought – if you figure out that something on your shopping list is on sale, you would buy it, right? That is part of enjoying the savings. Stocks, too, could be done that way, which means – when the prices are down, you can invest in them – since you can enjoy the savings. It is quite a smart move. After all – isn’t the rule buy low and sell high – that is pretty much the mantra for stock market investments.
But, just the way you would regularly shop – it is not always quite wise to buy things just because they are in that big sale. If you did not already plan on investing in the stock at the time, or you were not interested in it, and the prices suddenly drop – you could possibly be bagging not-so-great stocks. This is not the right move.
As previously mentioned, when it is ‘already on your shopping list’ – which means you were interested in it, you wanted it, and you know how well it was doing. This is not the case for this.
But why not buy these stocks when they are low?
For the first point – it was sudden, which means you did not know to save up on any money for this. And you would also sell another investment to buy this, which is not advisable.
Also, the most important part – if the whole market is down, then you would lock in losses. Also, even if you have the money for it – shouldn’t your decisions be based on your financial goals? Not just a sudden discount.
Instead of this – if you are planning on actually buying stocks, here are some tips – or should be said as some of the best times to invest in the market.
What is a Good Time to Invest in the Market?
Let us take it one step at a time; below; you will find the best time to invest in a day, week, and year. Use these tips, and just see how they work wonders for you with the right kind of strategies.
1) During the Day: On regular trading days, the stock market would be open from 9:30 am. If you plan to buy and hold, which means you will be investing in trading, it will not make a huge impact on what time of the day you buy the stock.
But, if you are a trader – most importantly, a day trader, you would prefer volatility. You would keep noticing the price swings through the day. This is exactly why the best time of the day for you would be from 9:30 am to 10:30 am or 3-4 pm. These are the first and last hours of trading where there would be more activity.
Before you jump right into this – make up your mind if you want to stay for the long run, or be a day trader.
2) During the Week: There used to be an effect called the Monday effect – which has now faded into non-existence. For the past 45 years, the stock market has not seen changes in buying and selling based on days anymore. So, the best thing during the week for you is to go ahead and trade stocks whenever you feel like it. It does not count if it is Monday or Sunday. The weekend effect, the Monday effect – either of them does not make sense in today’s market.
3) During the year: Have you heard the phrase, “Sell in May and Go Away,” or have you heard about the ‘January Effect.’ All of this means there are never-ending theories on the monthly movements of the stock market. But, the truth is – that most investors usually sell stocks at the end of the year, and it is part of their tax planning. They look forward to locking in losses or taking up capital gains when it makes sense for their taxes. This is what would lead to the January effect too.
But, it would not make any sense to hold money from may all the way to the end of December so you can start investing. Mostly, if you did follow this, you could be losing out on a lot of opportunities that come onto the market.
Is it right to time the market?
This is pretty much for every investor out there – it is never okay to time the market. Even some of the most successful investors and traders of the stock market – had no belief in it at all. Warren Buffet, in particular, avoided timing the market throughout his career. It does not mean you should not do it because the others are not doing it – let’s talk more logic, shall we?
When you simply look at some statistics, you would find out that timing the market could be a huge mistake and also a big risk. Just say you invest your money in an index that does well at the beginning of the century, and you have estimated a 6% return for a period of 20 years. Them boom, this is the time of the dot com bubble and the great recession – did you see that coming?
You can rely on stats, understand a business for how it would perform, and much more – but you need to know that the market is unpredictable.
When you think about starting to invest in the stock market – forget about the time element. But, you have to remember these points – having a plan, thinking long term, the matter of diversification, and also it’s okay to estimate wrong sometimes – but make sure you make informed decisions according to your risk appetite.