PFF Panel 3
Seedly PFF 2019
Asked on 02 Mar 2019
Well I think timing the market is truly a difficult thing to do. If we could all time the market well, we would be millionaires, and there wouldn't be a need for Financial Analysts and brokers any longer!
I think the best thing to do is to evaluate the company's value - is the company's current stock price in the market lower or higher than your calculated intrinsic value? if it's lower, then no matter what the price will eventually go to this intrinsic value according to your calculation - it's a buy! if it's the other way round, then you could possibly short the stock as you anticipate an eventual fall in price as investors start to not see the value in the stock and sell off.
If not, perhaps Dollar cost averaging can help you as it removes the need to time the market completely - your good buys balance our your bad buys, so eventually the price averages out.
That being said, there is no need to be eager to jump right in! evaluate what you want to buy, read the news, get enough supporting evidence to show that the firm will do as well as you believe it will, before you invest. You can really see a much better chance of profits in this way!
Hello! Just a thought - I would say no. Imagine you have 100k, which is for most of us, quite substantial a pot of money to deploy.
The market starts turning down. How do you know when to enter the market? At 10 percent people are saying that it's a correction and it's normal. 20 percent more people say it's now a downturn, but those invested in it tell you not to worry and that the market is resilient. Before long it's 50 percent down. By now you start thinking maybe it's a falling knife, so you'll wait. Before long the market has recovered by 20 percentage points and you think you've missed the boat.
Good theory, but we are unable to time the market to know when is the true market crash.
That aside, I do feel if you are able to do that why not? However you will be psychologically pressured of being labelled as a fool because the stock market is enjoying good times now. You will need to withstand the psychological burden and have the mental fortitude to sit around and do nothing for years
Before you start investing, it will be best to understand your objective. Here are some questions to help you:
What is your capital?
How will you want to invest your capital? E.g. lump sum or an amount on a regular basis
How long will you want to stay invested? E.g. 10 years
What is your risk appetite? E.g. How do you feel about short-term volatility?
What is your objective for investing?
To determine if the market condition is favourable to invest, the question will be: Is there a right time to invest?
Accordingly, I have compiled a list of financial crisis and disasters since the 90s and every other strong reasons not to invest. However, the market has proven otherwise year after year.
Therefore, focus with the right investment strategy by knowing your investment objective. Then decide the tenure and decide if a lump sum or smaller amount works. Finally, invest into assets that suits your risk appetite.
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