Asked 3w ago
I have a few hundred dollars and would like to invest in stocks now as prices of stocks are at great bargains. However, I know that a larger capital is better than a smaller one for various reasons.
Thus If I were to save $5000 and invest it all in the next 6 months, will I potentially be missing out on the discounted stock prices NOW and be at the risk of the stock prices going up?
There's no way to tell for sure, as prices could drop again before rebounding.
However, I need to caution that investing a few hundred dollars in stocks is not really cost effective as the transactional costs will be a high percentage of your contract value. Aim for 0.5% or less. Also, don't worry about missing out on opportunities. They will present themselves again.
Aim to find the right stock to buy as well. SIA may be severely discounted, but is it a good stock to invest in? Always remember that it is better to buy a good company at a good price than a mediocre company at a cheap price.
Opportunities are everywhere, and at any point in time.
I always share that there is no rush to participate in the market. The mindset to be in the market, the money management ways and the method you use to participate is important.
Will like to address the word "cheap".
Many times we are looking for "cheap" stuff. How do we define it as "cheap"?
It is cheap relative to its previous high? If that is the case, we have to ask why is it cheap? Is the company not growing in earnings? Is it losing money? Cheap cause of scandal? Or fraud? Is there something changing that causes the company to lose its competitive edge?
In fact, we at The Growth Hunter look at stocks that are ~10% off the highs. Most people will shun these stocks saying it is expensive.
What if we told you that the earnings of these stocks are in its growth stage and its earnings are increasing at least >20% and some have earnings increasing 100% or more? The current price where it is close to the high, is actually cheap because when the future earnings are announced, the price will rise even further and explosively.
See how the perspective of "cheap" differs?
Hope we offered you another lens to this, we share more on
Timing is not essential (and impossible).
take the more boring (but more successful) way, investing is not event-driven:
Definitely. It's a balance between cost effectiveness and opportunity costs. If I were to change the scenario that if the stock prices keep going down but you decide to invest every month, you will be buying at a way discounted price. And on the 6th month, the stock price increase, you'll only be using a small capital to purchase only which is good. There is definitely no right or wrong because everyone has their own circumstances and financial constraints. Too many what if and we always want the best case scenario everytime.
Therefore, as long as you have a long time horizon and consistently stay invested with any approach in a good company stock, this should not be your main concern. Work within your limits, you'll be fine!
Honestly, there needs to be a mindset shift here. Fear of "missing the boat" is why many investors make irrational, bad decisions. Always set rules for yourself when investing. I would say investing 1-2k at once should be the minimum amount.
Don't worry about missing the boat. If you're young, its much more important to create a criteria for investing. Also, you should probably focus on the big wins.
The wokesalaryman wrote a very good article about this: https://thewokesalaryman.com/2020/01/27/the-single-mistake-everyone-makes-in-their-20s-trying-to-build-wealth/
Alternatively, you could read my blog if you want to know about the financial goals i set for myself:
I think $1000-$2000 capital for each stock as starting block is decent enough tradeoff between mimizing the transaction fees as a % while taking the time to save up.
Who knows if stock market prices will exactly go up and down over the next few months? even if it goes up, I doubt it will a vengeful V shaped recovery as long a vaccine is yet to be found & most of us had to abide to social distancing worldwide
As many have mentioned before 'Time in the market is better than timing the market'. If you dont have a large capital now, there are still ways to be invested in the market now via DCA which is investing a fixed sum of money every month/quarter/year.
With just $100/month you can follow a DCA strategy through a RSP with dbs invest saver/ocbc BCIP or robo advisors to diversify into global markets! The returns wouldn't be as high as a lump sum investment, but it can be a less risky way to invest during these volatile times.
Here's an article by seedly on this. All the best!
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