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[W637]When To Buy Stocks

by Vijay, Vij

The question that is foremost in the minds of investors at all times is what is the good time to buy stocks. When the market is bullish and prices of stocks are high, investors tend to invest huge sums of money. It is definitely a good idea to invest when the market conditions are good. Investors always gain from such transactions at such times.

However, when the market shows a bearish trend investors become skeptical, asking the question ?is it a good time to buy stocks?? In fact during economic slump, people tend to invest only in fixed equity rather than floating stocks for the fear of losing money. Contrary to the popular belief, it may actually be a good time to buy stocks and make long-term investments to make the biggest gains by thinking ahead.

History suggests that investors who had made long-term investments during the economic downturn of 2003 or the dotcom bubble burst have been the major gainers in terms of profits. However, it is good to take some precautions while investing in such times.

1.It is very important to invest only in shares of large companies. These companies, with a history of rejuvenating and tiding over bad times give investors the assurance that they will actually recover tiding over the downturn. These large-cap shares are the ideal candidates for investment at such times.

2.Next is that those companies which pay dividends mostly have good stable businesses. Moreover, dividends that investors get help them to tide over the ?bad times.? It is always a good time to invest in high-dividend-paying stocks during recession.

3.Another trick of the trade to make such conditions a good time to invest is to invest in small proportions and not in huge amount for a single stock. At this point, it is good to chart out an investment plan for each company and distribute the investment. Moreover, a company which may be showing a very low stock price at present, but is a big name and has a good history of recovery may sought for more investment from the investors. Looking at various factors, the investor has to take this decision prudently.

4.It is also a time to making long-term investment with the vision of making good investment in the future. It has been seen that a bullish trend is followed by a bearish trend and vice versa. So an investor investing in stocks supposed to bring benefits after say 4 years, gives the stability that the market will recover and the money will not be lost in the downturn.

5.Also, when the prices of usual stocks start falling, it may be a good time to invest in other kind of stocks that will never be out of demand. For example, gold stocks or oil stocks can be very good investment options at such times.

Thus, we see that every market situation offers something new for investors. Experienced investors, who have witnessed the fluctuations in market trends over years, know that it is all about taking the right decisions at the right time.

Back in 1998 I wrote an article warning people that the stock market was extremely overpriced. I was seeing obvious signs of idiocy in the stock market. The first big sign was a rampant hype of how great the big stock opportunity was in the popular press. I was seeing new investing shows pop up on TV. I was seeing young attractive women that look fresh out of am MBA program and dumb as dirt — CNBC's "Money Honey" Maria Baritomo on the floor of the NYSE gave a daily blow by blow account of how everyone in the public was going to get rich if they just bought in.

It all reminded my of Bernard Baruch's account of why he sold out at the top of the market in 1929. On his way to work he stopped to have his shoes polished. The shoeshine boy said, “Mister, let me tell you a bout a great stock I just bought… I ain't gonna be shining shoes for long.” Baruch immediately went to his office and sold all of his stock. Later he told a reporter that when an inexperienced stock market idiot of a shoe shine boy is giving recommendations it is time to get out. In 1998 airline stewardesses were bragging about their stock buys and counting the days to quit their job.

Nothing could have been farther from the truth. The inside corporate executive controlled media firms were pumping investment sewage into the minds of the public. Why were they doing this? Because they had enormous holdings of employee optioned stocks that they needed to dump on the public. That is exactly what they did and public investors jumped onto the insider Punji stakes. In late 1999 and early 2000 just six months before the great stock market crash every time a greedy inexperienced idiot in the public bought into the great American rip off and bought stock an insider sold out for extraordinary profits. The vast majority of all inside corporate executives sold out their holdings on a stupid, greedy, public whipped into a buying frenzy buy the U.S. media that is controlled and operated from behind the scenes by large U.S. corporate insiders.

I just read an article in Business Week entitled “Blue Chip Blues.” The article discusses the fact that the companies that comprise the S&P 100 have had a stellar 200%+ increase in earnings but share prices have increased less than one percent. This says that the public is not paying any attention whatsoever to the market. It is kind of like in high school where most of the kids paid attention to the cool kids even if they were stupid and wrong and can barely hold a job as adults.

We know in financial economics that the public is right in the middle of a major market move where all you have to do is buy and hold on tight — no brain required. The public is dumb as dirt at the bottom and the top of the market however. We are at the bottom right now. I know this because of the articles I am seeing about how much the stock market sucks right now. I was treated like Chicken Little in 1998 when I told everyone to get out as I ran around screaming “the sky is falling!” I was right. Now I am running around screaming the sky has crashed so buy, buy, buy! Yes folks right now is the time to buy and the sky is about to rise again. Chicken Little is always right in the end!

Article Source : How To Trade Stock

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Both Vijay & Dr. Scott Brown, Ph.d. are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.

Vijay has sinced written about articles on various topics from Investing and Trading, Painting and Investing and Trading. SogoTrade stock broker:Sogotrade free research tools:. Vijay's top article generates over 49500 views. to your Favourites.

Dr. Scott Brown, Ph.d. has sinced written about articles on various topics from Best Mutual Funds, Finances and Car Parts. . Dr. Scott Brown, Ph.d.'s top article generates over 49500 views. to your Favourites.