when to buy stocks

Global stock markets have seen dramatic selloffs across the past nine months. The largest and most important US share index is currently sitting roughly 25 percent off its late 2021 high, while our own major share index is around 15 percent below its own high.

With this current selling, we are witnessing increasingly negative commentary from the financial news media and increasing selling from retail traders and investors.

However, right now is actually a much better time to buy shares that at any point in 2021; prices are simply lower.

Yet if you had been listening to the news media and commentators back then, they’d have told you how great a time to buy it was. Those same commentators are now telling you it’s a terrible time to buy.

Mainstream financial commentary will always be reactionary – they will always advise and comment on what has happened, even when they try to frame their commentary as forward looking.

Markets will also always be cyclical. There are times when the market seems unstoppable, like the rally will never end. Similarly, there are periods when it seems like the market will never find a floor, that prices will fall for ever.

So how do you know when to buy?

Timing a buy will come down to many factors, including investment horizon and risk tolerance. But put very simply, the best time is when everyone else is most negative.

This is all well and good to say, but how do we determine when this is? Often when we think all hope is lost in financial markets, we lose an additional bit of hope that we didn’t realise we had.

Therefore, to determine appropriate buying times, we use fundamental and/or technical analysis. By doing this, we remove as much of the noise, emotion, and irrelevance from our decisions as possible. Instead, focusing on technicals and fundamentals allows

Technical analysis is all about gauging share price momentum, with the aim of determining when that momentum will continue, or when that momentum might shift.

By focusing on technical analysis, we look at charts to determine when a floor is reached. This could be by measuring distances from moving averages, or through the use of candlestick patterns.

Fundamental analysis looks at everything not covered by technical analysis. The most commonly applied fundamental analysis techniques look at a company’s financials. The premise of this analysis is to look for share prices that are low compared to a company’s value.

By focusing on fundamental analysis, we aim to find stocks that are cheap relative to their earnings, potential earnings, dividends, or other financial data.

By using these different analysis techniques, we aim to filter out the emotion, doubt, and noise from our investment decisions.

To learn more about timing your investments on the market, check out our new fundamentals investing course by clicking here.

You can also contact us on 03 8080 5788 to discuss some of our more substantial course options.