There’s always one pressing question on the stock market… is waiting for low levels a good strategy?
It’s a question that every investor asks at least once, and one that too many investors continuously dwell on. If you’re investing for short term trade and profit, then catching the stock market at a low point can usually provide returns in the not so distant future.
However, when you think too much about this, you can easily get caught out, and end up not buying stock at all, or buying on an uptrend when you could have made your investments earlier.
History Shows That Slow Investors Ultimately Lose Out
Take the Dot-Com bubble as an example. Throughout the 1990s, the new generation of tech stocks were constantly climbing. By March 2000 the peak was hit, and there was a significant market crash. Some companies declined by almost 90% (Cisco being a great example), before eventually recovering. Some investors didn’t take advantage of this massive decline, and tech stocks have steadily grown since then, and are now some of the highest performers in the Market. Companies like Qualcomm and Apple would have been steals at post-2000 pricing, but too many investors were overly cautious and slow to react.
In 2018 we can see something similar happening. Markets hit a peak at the end of last year and in the opening stages of this year, before things started to decline again. In May we can see days of recovery with strong growth in almost every sector, yet, some investors are casually waiting on the sidelines.
The stock market has always been as much about data as it is chance. Numerous factors contribute to stock decline and growth. On Monday, the Dow went up by almost 300 points, and many investors reaped the benefits. Still, some simply didn’t act.
When the market was declining earlier this year, some investors lost confidence and started selling, hoping to buy again before the next upturn. The slower investors missed some serious dividends this year, all because they were chasing a market bottom line that nobody can realistically predict.
Waiting or… What Can You Do?
What’s the best piece of advice? Don’t wait forever for that magic moment. Try to feel the ebbs and flows of the market (within reason) but don’t get caught up on chasing that ultimate low point where you stand to make the most money. Look for solid growth stocks and promising bargain stocks, and diversify so that you are protected from risk as much as possible.
In the stock market, you can lose money on investments, even if that money is on paper from stocks that you have never cashed out. Holding onto stocks from strong companies and buying in on promising stocks is a far better strategy than trying to react to every peak and trough on the analyst graphs.
You may be interested
Job Hiring is Picking Up as Employers and Consumers Gain ConfidenceLamont J - March 29, 2021
The recent government stimulus for small and medium-sized businesses, personal stimulus checks, and declining Coronavirus cases, are all great news…
Fed Could Maintain 0% Interest Rate Until 2024Adam R - March 26, 2021
The Federal Reserve is holding its target interest rate in a range of 0.00% - 0.25%, even while the economy…