Stock market accounts increased by 61 percent in 2020, indicating that more Filipinos are dabbling in trading. While stocks aren’t guaranteed, they do provide investors with the opportunity to increase their money at a faster rate than other investments.
Trading, on the other hand, is not for the faint of heart, as market volatility can scare both novice and experienced traders. You could lose money even before you make your first buck if you’re not careful.
Before you enter the market, you should master the fundamentals and continue to practice and invest. You need also be aware of when to acquire stocks in order to get a beneficial outcome.
When is the most advantageous moment to invest in stocks?
When the stock market reaches a low point, the answer is yes. It’s at this point that market timing becomes important. Past performance is no guarantee of future results. Always keep the cycle in mind. Past performance may be a good predictor of future results.
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The best time to buy equities is during the opening hour
The opening hours are the period during which the market takes into account all of the events and news releases that have occurred since the previous closing bell, contributing to price volatility.
The first 15 minutes of the day are crucial for an accomplished trader. Based on initial trends, it can provide some of the finest trades of the day.
One of the greatest times to trade is between 9:30 and 10:30 a.m. You can buy stocks till 11:30 a.m. if you want to extend your day trading hours. However, many traders will often halt trading during this hour because volatility and volume tend to be lower.
If you’re a beginner trader, you should avoid trading in the early hours of the day. It might be difficult to identify the best patterns to profit from at this time, which can lead to losses if you’re not diligent.
Monday is the best day to buy equities
The market tends to decrease at the start of the week, Monday is the ideal day to buy equities. It’s unclear why this is the case. This reduction has been ascribed to the volume of bad news that was released over the weekend, according to studies.
It could be due to investors’ pessimism about investments stemming from their negative mindset about returning to work at the start of the week. Nonetheless, Monday is the best day of the week to buy stocks.
January, August, September, and December are the best months to buy equities
It’s the start of a new year, which means that folks have just received their holiday bonuses and more income. Having more money allows you to purchase more stocks.
You can acquire extra shares with a portion of your 13th month or year-end bonus. Share prices tend to rise as more buyers enter the market, so if you’re still unsure when to buy stocks, it’s better to do so before the month closes.
August is known as the “ghost month” because stock prices fall. Because fund managers often go on vacation abroad during ghost months, value turnover is smaller, and superstitious investors take a break.
In truth, the Philippine Stock Exchange fared well for ten phantom months between 2009 and 2020. During August, the PSE barely lost 0.39 percent on average.
As the phantom month draws to a close, the market is starting to gather up speed. It’s the first day of the fourth quarter, and investors are rallying to get the most out of their assets before the year ends.
The way the first quarter finishes can predict or act as a guide for the market’s path in the future year. No one wants to end the year on a bad note, whether it’s an investor or a firm.
Because investors (including individuals and corporate fund managers) typically sell their shares at a loss at the end of December, prices tend to fall. They can deduct their losses from their capital gains taxes if they disclose them as capital losses.
As a result, investors pay lower taxes because their capital gains have fallen. More sellers in the market, who seek to take advantage of capital loss deductions, drive stock prices lower.
Other times when it’s a good idea to buy stocks
- A stock is put up for sale. If stock prices are oversold, investors can determine if they are on sale. Consider setting a price range for when you want to buy stocks on sale.
- Examine analyst reports and numbers to help you figure out what price range you should buy in.
- Stocks that are undervalued. If you buy inexpensive stocks, you might get a good price. You will, however, require a price range in which to purchase such shares. Estimate a company’s growth and profit potential to help you choose a pricing range.
- A discounted cash flow (DCF) analysis can be used to examine a company’s predicted future cash flows and then deduct them from the present using a risk factor. You may estimate a price range using the sum of these discounted cash flows.
- You have done your research. When stocks are on sale or discounted, it can be enticing to buy them. However, it’s always a good idea to do your homework and research before making a purchase.
- Subscribing to financial newsletters, examining corporate reports, and reading the most recent market news releases are all good places to start. Before you enter the market, make sure you sharpen your analytical skills.
When buying stocks, there are a few things to keep in mind.
Before you spend your hard-earned money, consider a variety of signs to see if you should invest in a company’s stock. Here are some things to think about:
- Earnings. Examine the company’s earnings growth from year to year. Determine whether the reported earnings are significantly higher than the sector and competitors using the report.
- Cash flow that is not constrained. Look for a business that has a steady stream of free cash. After a corporation reinvests to keep its operations running, it has free cash. A corporation with strong free cash flow has an advantage over its competitors. This advantage comes into play when considering the company’s long-term viability.
- Net profit margins. This is calculated by dividing a company’s net income by its sales. It may assist you in determining how effective the organization is at generating profits from sales.
- Stability. Every business will experience losses from time to time. It’s a natural occurrence, especially when the economy is struggling. When the rest of the market is struggling, don’t focus on a company’s stability. Instead, examine its general stability in light of current economic realities.
Nobody can predict the market’s movement with 100 percent certainty. However, historical evidence shows that the stock market moves in three directions: upwards, downwards, and sideways.
What goes up must eventually come down, and vice versa. When the market is down, buy stocks and sell when the market is up. When deciding where to buy stocks, take into account several criteria such as a company’s free cash flow, stability, and earnings.