These days choosing the right time to buy a stock requires a bit of research and investigation.
First, one must analyze the company making the stock available (you can check out resources such as Google Finance, Yahoo! Finance, CNN Money, etc.) Things to look out for are the company’s history, it’s growth and price-earning ratio (also known as P/E ratio) – make sure to examine a company’s revenue and profit margin from public filings, as well as any potential prospects of growth in the future. Upon buying shares, one suggestion is to purchase shares in batches – if you have confidence in the company but the price keeps declining, buy more. However, other’s suggest that if it continues to drop and you have lost 10 per cent of the value, swallow your losses and pull out.
Many believe that unless a company is in serious decline, it is worth the wait to hold onto a stock for the long-term even though one might get a substantial profit by buying stocks before their earning, however one might lose quite a bit of money if the report is not great. Finally, be sure to keep a good eye on your money and watch how the market reacts, paying close attention to market indexes such as the Down Jones Index and S&P 500.
When you buy shares of stock, don’t buy all in once, try to buy in sequence. If you have faith in the company but the price is keep dropping, buy more! if it keeps dropping and you lose 10% of the value, get out and take your loss.
It’s always good to hold a stock long term unless there is a serious problem with the company. Although, you might get a lot of profit by buying stocks before their earning, but you can also lose much money if the report is not great.
Watch how the market react and pay close attention at the market index such as S&P 500 and DJI. During economic recession where unemployments are high, subprime mess, the market usually react harshly on any bad news althought it might have been repeated over and over again. This is probably a good time to “short” the stock that you think will not perform well.
Look for hot sector, for example: education and energy were hot sectors in 2007 and financial was a bad sector to get in unless you want to hold it in a very long term. On the other hand, tech might always be considered as a hot sector. However, we should not forget what happened in the dot com burst.
Never get into over hyped stocks if you already miss the boat. China stocks for example, after growing so much for the past 2 years, they have a 20% down price correction in just less than a month. I learned this from experience and I don’t want you to experience the same thing.
Don’t be greedy, once you think you reach your goal, sell it. Remember that Sheep get sheered; Pigs get fat; but Hogs get slaughtered.
Disclosure: no positions