When To Buy Stocks
So many people do not know when best to buy stocks to be able to make profit. In fact, some people, without knowing what they are actually doing, buy stocks at the time they are already in their peak price, and will soon start falling. Such people buy at high price, only to be forced by the need to cash out, to sell at low price and therefore lose money.
You mustnâ€™t buy any stock without first investigating it and understanding the circumstances surrounding it. There are certain situations a stock is facing that will enable you make profit if you buy it, and then sell later, while on the other hand there are situations when you shouldnâ€™t buy else you stand to make loss.
Below are key circumstances to look out for to help you buy stocks that can make you profit.
Buying When There Is Price Drop
It is better to buy stocks when prices are going down. This will afford you the opportunity to buy them cheaply and sell higher later and make profit. There are times when prices generally may drop, which you have to look out for. Such times include after companies Annual General Meeting (AGM), after companies have given bonuses, after companies have paid dividends, and during bearish market.
Buying During Crises
When a company is having difficulties might be a good time to buy its shares, however, you must be sure its future is bright, that, the present problem it is facing will not affect its future.
Most people will want to sell off their stocks when a company is in controversy or crises, and so the price will drop. However, to a knowledgeable investor who is sure the present crises will end so and the company will bounce back, it is a great opportunity to buy the companyâ€™s stock cheap.
Buying When A Company Is To Be Taken Over
Whenever a company is to be taken over, most investors usually panic and want to dispose of their stocks quickly for the fear that the fortunes of the company may be nose diving, which may have necessitated the buying over.
However, this might be a good chance for you to buy the stocks at cheap price, and take position in the new company that will emerge and make good profit selling later at higher price. But before you buy, ensure that the companyâ€™s financials are in good standing, and that the core investor who is taking over the company has the ability to move the company to greater height.
Buying During Recession
During recession, people donâ€™t usually buy stocks as much as they sell what they already have. This is because there is little money in circulation, and many people will want to sell their stocks to have cash for other pressing things. Therefore, at this time share prices are usually low. Buying at this time will enable you to make good profit when recession rolls away and you sell at higher price
Buying When Company Performance Is Poor
Most people will like to sell off their stocks in a company after it posted a poor end of year result, and of course, this will lead to drop in the companyâ€™s share price. If you have the right information that assures that the company will be pouncing back with good runs inn future, you can go ahead to buy cheap and make good profit later selling at higher price.
Buying During Bearish Market
During bearish market prices are usually very low. This allows you to buy stocks very cheap to sell at higher prices when the bulls return and the market is vibrant again. However, ensure you have an idea of how long the bears are going to run the market, so that your cash is not tied down for too long before the bulls take over.
Buying Stocks At Their Year Low
Looking out for stocks at the point of their year low and buying them enables you to have them cheap because their prices would have fallen. You will be making a good profit when you sell them later when their prices start moving upward. However, before investing, check to see that their fundamentals are good.
Buying Stocks With Good Fundamentals
Stocks that have the following characteristics stand to be profitable in future, and are good buy: good quarterly report and performance, consistent financial performance and growth rate, good management, good earning prospect (EPS and P/E ratio), good reserve and shareholdersâ€™ funds, good back-up from government policies, good product in the market place.
Buying Stocks After Year End
Stock prices usually drop after year end. This is because companies would have been marked down and activities at the stock market would be low. This is a good time to buy cheap.
As you can see, it is generally beneficial to buy stocks when prices are low, however, donâ€™t rush buying stocks whose prices keep sliding even when the general market movement is going up or is flat. You have to find out what is causing the continuous downward slide.
Could it be that the companyâ€™s products are no longer selling, or that its clientele has dwindled? Or could it be that it is incurring unexpected cost that is increasing its cost of production? Or is it that new competitors have entered the market and are taking over part of its market share? Is change in government policy affecting its operations negatively?
Knowing what is causing the companyâ€™s share price to fall, and putting it side-by-side with the proven strength of the company, you will be able to predict if it will overcome the challenge in future, and if so, you can go ahead to buy its stocks.