One of the most important dilemmas, in particular for new investors, is when to get in or leave the market. There are a lot of theories, but I’ll concentrate in the ones I found more interesting.
When to enter:
One position – old one – says that whenever the values are dropping, is a good time to buy; and this is true. The point is WHEN can you buy, immediately after the slowdown starts? You have to wait to see if the value keeps falling as time passes? Do I have to make a research about previous movements of this paper I’m interested on?
As you can see, is not that easy!
I recommend taking a careful look to see how that paper has been moving during the past, let’s say, 12 months to see if its actual value is close to the “roof” or to the “floor” (highest or lowest value). Is there any rumor that might affect this share? (for example takeovers, mergers, something affecting the industry – locally or around the world). It’s a “sale” that you can take advantage of? Did you check the company’s balance or any public information about it?
A second position states that is better to get in ones the paper made the turn-over, this means its value is starting to grow because then you’ll probably be able to “ride on a good wave”. Again the previous analysis has to be done in here too
When to leave:
The old one says: As far as you gain a good number you better leave it because a lot of people like you are making the same analysis. The point is: what is a good number 2, 15, 100%? The answer varies according with your investment decision. A good idea is to leave when you’ve reached the % you assigned to be obtained by this paper. But, sometimes being too ambitious can make you lose a lot…
Other ones think about leaving the paper when it starts to drop, it’s also a good point, but your looses may be higher than in the previous case if for example the company’s share experiences a big fall in a single day and then you try to guess what can happen on the following day, plus a lot of people will be doing the same than you do: SELL so the value falls even more!
As I said on the entering point, get all the information you can before making your move. Of course, a bit of luck is always welcome!
Till my next post!
Prof. Lic. Fernando Julio Silva, MSc.
SEPTEMBER 2008
When to enter:
One position – old one – says that whenever the values are dropping, is a good time to buy; and this is true. The point is WHEN can you buy, immediately after the slowdown starts? You have to wait to see if the value keeps falling as time passes? Do I have to make a research about previous movements of this paper I’m interested on?
As you can see, is not that easy!
I recommend taking a careful look to see how that paper has been moving during the past, let’s say, 12 months to see if its actual value is close to the “roof” or to the “floor” (highest or lowest value). Is there any rumor that might affect this share? (for example takeovers, mergers, something affecting the industry – locally or around the world). It’s a “sale” that you can take advantage of? Did you check the company’s balance or any public information about it?
A second position states that is better to get in ones the paper made the turn-over, this means its value is starting to grow because then you’ll probably be able to “ride on a good wave”. Again the previous analysis has to be done in here too
When to leave:
The old one says: As far as you gain a good number you better leave it because a lot of people like you are making the same analysis. The point is: what is a good number 2, 15, 100%? The answer varies according with your investment decision. A good idea is to leave when you’ve reached the % you assigned to be obtained by this paper. But, sometimes being too ambitious can make you lose a lot…
Other ones think about leaving the paper when it starts to drop, it’s also a good point, but your looses may be higher than in the previous case if for example the company’s share experiences a big fall in a single day and then you try to guess what can happen on the following day, plus a lot of people will be doing the same than you do: SELL so the value falls even more!
As I said on the entering point, get all the information you can before making your move. Of course, a bit of luck is always welcome!
Till my next post!
Prof. Lic. Fernando Julio Silva, MSc.
SEPTEMBER 2008
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