The old age question, how do you time the market? I mean it seems pretty easy – buy low and sell high, right? If you can successfully do that you will always make money but unfortunately, its a lot more difficult to actually do that and even the most experienced investors lose money on trades. Many can’t beat the market (ie sp500).
Unless you have insider information, you really cannot time the market. That’s not to say you can’t make educated trades; but you can never be sure.
For the average investor, there is a saying: Time in the market is better than timing the market. This simply means don’t try to time the market. The average investor should be investing in index funds and putting money in as they can.
Having said that, if you have invested your retirement savings for the year in your index funds and want to buy some stocks is there a way to buy/time them? There are ways to make good educated guesses…
First, find an industry that you know – What companies hold a lot of future potential and are currently undervalued? This is called value investing and is how I invest in companies. I have been in love with technology since I was a kid and have a good eye for predicting the role technology has and how it will change society. Thus I put my money in tech companies that I understand, I believe are undervalued, and I believe will go up in the next 5-10 years. I’ve done really well over the last 10 years and I would love to say that means I am a good investor…but the market has also done well over the last 10 years, so everyone has done well.
Then when you find those companies, I usually like to wait until a bad day on the market, when everything is down, and buy that company. That way I bought on the dip and hope it will go up when the market goes back up.
But no matter what you do, you are always taking a chance in the market. You can never know for sure. This is why the average investor should be focusing on index funds, even when the market is down as it has been the last week over fears of coronavirus. Remember, even after crashes (1929, 2008) it was back up within 2 years. Good luck! Check out the following video for more info: