These days, the stock market is as shaky as ever. But, for the smart investor with dispensable cash on hand, there has never been a better time to Buy and Sell equities. You must be wondering – why would anyone in the right mind buy stocks when prices are going down? This is because historically the stock market has provided the best returns on investment over the long run. If you have ever heard the investment chatter at the water cooler, you would’ve heard the phrase ‘Buy low, sell high’. In times of bear markets such as 2001-2003 and 2008-2009 i.e. when stock prices have been going down for a while (without getting too technical) the prices of stocks are its lowest due to panic in the markets.
So, going by the ‘Buy low, sell high’ theory, it is in fact the best time to buy stocks. A caveat – you should only invest money in the stock market that you don’t need for the next 3-5 years. This is because stock investing can be risky and it could take 3-5 years for you to see a significant return on your investment. If you don’t have money to spare but want a piece of the action. I have only one suggestion – Don’t invest!
Since you are still reading, I haven’t scared you away (yet). So, lets move on. The way the stock market works you will never know whether the price you bought a stock at is the lowest price possible. Also, you will never know whether a price is the highest a stock will ever go. So, when do you buy and sell? Ideally, you have a range in which you are willing to buy a small piece of the company (1 stock) and a similar range of prices for which you are willing to sell. Before I get into the specifics of how to determine stock prices through the two forms of analysis. Fundamental analysis and technical analysis. I want to mention the role of brokers in the transaction of buying and selling.
Brokers are the intermediaries or middle-men who take your orders and execute them. Some individual brokers offer you advice on which stocks to buy/sell given the overall market conditions. The brokers who offer advice in addition to executing the order are called ‘full-service’ brokers. Understandably so, their advice comes with a higher price tag. A lot of folks use discount brokers. Some use online brokerages like scottrade, ameritrade,etrade etc. Which broker should you choose? I would recommend the one that offers the maximum stock research for the lowest cost of executing a trade.