Spreadsheet for Investing

Investment Spreadsheet By posterize

When is the right time to invest in the Stock Market?

That’s the magic question. People have asked that question for as long as the stock market has been around. The simplest answer is that there is no right time to invest in the stock market. It may seem as if some people have figured it out, such as billionaires like Warren Buffet who seems to always know when to invest, how much to invest, and where to put his money. But investors like him consider many more factors that have less to do with guessing the “right time” and more to do with trying to predict how the stock will do based on recent reports and announcements by the company. Even then, they could be wrong.

Many smart investors try to predict how stocks and the overall stock market will behave and try to invest according to what they believe will happen. The keywords in that sentence are “try to predict” and “believe.” Even though they may get it right 9 out of 10 times, they will still get it wrong that 10th time and it will cost them money, either because they invested in the wrong stock, or didn’t invest in a stock that sky rocketed to the top.

It’s extremely difficult to predict how stocks or the stock market will do. Although, it is possible to predict certain trends because they are more obvious than many of the other subtler factors that can determine how well a stock does. One great way to predict how a stock will do is to wait for their announcements and see what new products they are coming out with. If a company comes out with something innovative which looks like a product that will gain global popularity soon, you can assume, more investors will invest with the company and their stock value will go up. The reverse is true if a company cuts spending in Research & Development tells you that they may stop support for some of their products or stop creating them altogether, which may result in their stock value decreasing.

Either way, nothing is set in stone. Just because a company is coming out with a new product that’ll change the world, it doesn’t guarantee that the company’s stock value will go up. So the “right time” to invest with this company could very well turn out to be the wrong time.  The same goes for a company cutting spending on research and development, it could attract certain big investors because it could mean the company is thinking about starting dividend payouts or increase their current dividend payouts.

There are people out there who claim to know exactly when to invest in the market. And a lot of people actually believe them because of what they see. But the fact is usually that these people invest in many different sectors of the stock market and when they see success in one sector, they only share that success which makes it seem like they know what they are talking about all the time. This isn’t actually a scam (although there are scams like this), but it’s more of the person hoping his or her research pays off and more often than not, it does.

Just like people, you have companies with websites claiming to know which stocks will go up in price. And just like the people claiming to be stock market whisperers, these companies do extensive research which gives them hints about which companies will go up and which will go down. Then they share the information with the public, most of the time for a fee.

If there is no right time to invest in the stock market, is there a wrong time?

Unfortunately, it seems that there is a wrong time. Most people have the tendency to invest at the wrong time. A smart investor waits for the stock to go low so he can buy low and sell high. Most investors however, do the opposite and buy high because they believe it’ll keep going higher.  I try to buy low and sell high when I can. But I have been like most investors in several occasions where I purchased stocks when they were pretty high thinking they will go higher. I’ll give you an example from my own personal experience.

Earlier this year, I did research on a financial firm and a few energy companies. I won’t name them at this point. But my research told me that the stock values of both companies are bound to go up greatly as the year progresses. I’ve read articles and have watched videos of real experts telling investors like me, that these are two great stocks to invest in because they were priced low and they will release great products and services as the year passes. The prices of both stocks were pretty high compared to some of their closer competitors, but I just KNEW that they’ll go higher. For the first few weeks, it seemed like I made the right choice. Then out of the blue, both stocks plummet. The financial firm drops 10% while the energy stock goes down almost 30% due to bad economic news coming in from Europe. I know a lot of stocks went down at this time, and that’s why it was the wrong time for me to invest my money, even though the factor that took down the stock market was very unpredictable.

I don’t like to lose money on my investments. I still have both stocks with hopes that they will at least go back up so I can break even. I have had a similar situation last year when I bought shares of US Airways. I mentioned this name because I no longer own this stock and I don’t plan to in the near future. I actually bought this stock while it was still pretty low. So this wasn’t one of the situations where I bought high. There was news of mergers and acquisitions about US Airways in early 2010. So I did research and it told me that it was a good buy. One week after I purchased my shares, stock value goes up and I’m happy. And I thought, “maybe I finally found the right time to invest even if it is for one stock.” One more week passes and the Eyjafjallajökull (it’s OK, I can’t pronounce it either)Volcano in Iceland erupts. It grounds so many flights, the stock prices of US Airways drops heavily overnight. So I knew it was the wrong time to invest. But because I bought the stock of US Airways while it was still pretty low, the price of the stock stabilized. Even though the merger never went through, the stock price went up a few more dollars and I was able to sell for a profit.

The point is that the market is very unpredictable. You can try to predict it all you want to try to find the right time to invest or find the wrong times to avoid, you will never get it correct a 100% of the time. The best thing you can do is hope that the decision you made was a good one because anything can happen, whether it’s bad news from another country, a Volcano eruption, or even Armageddon. Too many factors are involved for you to figure out the perfect time to invest.

One thing that many smart investors do is buy low and sell high. That’s the best way to maximize profits. One huge mistake many other investors make is buy high because they believe the stock price will keep going higher. In some cases, it has been proven to be true. But usually, it won’t be how the stock acts because investors who paid low for the stock may sell the stock at the high price so they can maximize their profits. And when that happens, the people who bought high hoping that it would go higher, lose their money.

The stock market is dependent on consumer behavior. Trying to figure out when the right or wrong time is to invest is extremely difficult. Even though it seems as if some people have figured out a way to predict the market, their prediction is just as good as your local weatherman telling you that it will rain tomorrow. Sure, it may rain, but it’s just an educated guess because there is a chance that it may not rain. It’s the same with the stock market, even though a stock may increase in value, there is always a chance that it will not. There is no surefire way to predict the stock market. The best you can do is try, and the best that can happen is that you guess correctly. But that’s all it is…a guess.