Now there are a couple different problems you might (or should I say will) run into when investing in stocks:
- The price keeps rising and I want the most income I can get, when do I sell?
- The price keeps falling and I want a discounted price, when do I buy?
- The price doesn't seem to be moving much and I don't know what it will do next, what do I do?
Now all of these are very good questions and will pop into your head many times. Now instead of tell you in one paragraph the answer to all of them, I'm going to give you 3 paragraphs and many different answers, so get ready:
- (The price keeps rising and I want the most income I can get, when do I sell?) Now this is the most common of the three questions because it is impossible to tell when you have the stock price at its peek. But think about it, will an extra $25 do you any good in the long run, not really (its not enough to buy a car or house, maybe a nice dress or suit). So why worry about getting that small extra $25 and sell when it looks like a good amount of income.
- (The price keeps falling and I want a discounted price, when do I buy?) This one is a little easier to answer: (1) You can buy the stock when some good news comes out about it or earnings or (2) You can DCA. Now if you don't know what DCA is I will explain it too you: DCA or Dollar Cost Averaging is simple, first you invest in a stock (lets say 25 shares of Wells Fargo (NYSE:WFC) at $30) you invested $750 in that stock. Now two things can happen (1) The price will drop to $25 after you buy it. Then you invest $750 worth of the $25 share of Wells Fargo. If it goes up to $35 then do the same thing with $35 shares. This will cut your loses in half if you have any, but will do nothing too your gains if you have any.
- (The price doesn't seem to be moving much and I don't know what it will do next, what do I do?) Hold the stock.
Now these problems might not seem so complicated, pretty much all you have to do is stay calm and make good decisions, because if you are stressed and worried about the stock and try the make a big decision on it you will be putting more stress on yourself and most-likely make a bad decision.