When is a good time to buy stocks?
|As we well know in ForexSQ, in the world of financial markets, there are plenty of instrument to invest in. One of them is the stock market, where equities, stocks or shares are traded. A share is the ownership of a certain portion of a corporation. Once you own shares you are entitled to gain money from two sources: capital and dividends. Capital gains occur when the price of the stock rises. Dividends is a payment from the corporation to the shareholders. You can lose money if the price of a stock falls, while it is impossible to have “negative” dividends.
If you are an investor looking for “dividends” in the long run, then you should check which companies usually distributes profits to its shareholders. Not all companies have the same dividend policies. The questions of when to buy become less relevant if the investor only looks for a divided and to hold the stock for a long-term.
On the other side, the “when” becomes very important if the investor is looking for the stock’s price to rise and therefore achieve capital gains. Investors could look for capital gains in the short, medium and long-term; one could even become a daily trader, buying and selling stocks several times during a single day.
The question of when to buy becomes extremely important for a day trader and perhaps even more important when to close the position. The combo of options to invest also includes the possibility of “shorting” stocks. That is, to earn money when the price of a stock drops.
If the when to buy matters, the when to sell matters most because it is when one closes a position the moment when gains are materialized. You can own stocks that have risen 5%, but as long as you don’t sell them, you have not materialized any gains, you’re still on the market; yes, up 5% but still exposed to a change in the trend that could wipe all your gains out and transform that 5% gain into a 5% loss. Before deciding to buy a stock you need to have a trustable broker, one that offers you competitive prices and that suits your risk profile. After that, the best moment to buy a stock is when you have defined when, or under what circumstances, you will sell or close that position.
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