The timing of entering the stock market and being right is almost always an impossible task.
Buying low and selling high is everyone’s goal. This is an impossible goal because many of the variables that influence the direction of markets have nothing to do with the fundamentals of the underlying stocks in the companies they represent.
Most market timing systems are not really designed to call the market’s turns but rather which way to place their orders, to buy or sell. Since the market rises two-thirds of the time, a system that has you go to cash several times a year can cause you to miss out on some pretty big gains. That is why most market timers are market laggards, in other words too late to be right.
The best way for investors not to get beat by the professional traders and institutions is to look for good companies to invest in. They can be on the cutting edge of a new product, process or major trend. Then invest what you can afford on a set schedule in that stock. The first of every month, quarter or whatever frequency you are comfortable with and be disciplined. The investment should always be the same amount so as to not weight your average price.
Remember the old adage never put all your eggs in one basket. In other words, keep your investment spread out with a few stocks. Pick a level you are comfortable with, for example a limit of 10% in any one stock.
We never recommend specific stocks but we will when justified point out developing trends which will be indicative of a market sector to look for opportunity to invest in companies in that sector.
Investing in the stock market should always have a long-term horizon. The stock market represents the best place to grow your net worth but it requires discipline and patience and most of all a willingness to be vigilant and attentive.
There are occasions, where do to unusual circumstances it pays to take a small loss to prevent a big loss. This is usually the exception rather than the rule.
Investing in the stock market can be fun and rewarding and not as difficult as people believe.
We will continue to talk about this often and help you in many ways to become an effective stock market investor.
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