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How To Buy the Right Stocks at The Right Time?

Stocks represent ownership in a publicly traded company. Making extremely high returns on our investments is all about timing. If we take a market crash and recession as an example, it is merely an opportunity to make a fortune if we were to time it perfectly.

This is why there are so many tipsters and journalists trying to speculate on the near future – they’re preying on this thirst for timing things.

But the fact that this is true doesn’t make it possible. And the fact that it’s so alluring is the very reason why we must resist the urge to time things. Time in the market, as they say, beats timing the market.

Why Timing the Market is Impossible

There are two ways to explain why timing the market is impossible. Firstly, through logic, and secondly through empirical data.

Logically, the reason why we cannot time the market is because of something called Wisdom of the Crowds. This is a theory that explains how the consensus of a population is far more accurate in their guesses than any one individual can be. For example, farmers guessing the weight of cattle can be done within 1lb of accuracy, beating any individual expert farmer.

The same goes for buying stocks. It’s a fallacy that we need to be better at predicting the market than the average person (i.e., being better than 51% of the traders participating). This isn’t enough. We actually need to be better than the consensus, which is the price itself, and according to Wisdom of the Crowds, this means even being better than 90% of your peers likely still isn’t good enough.

It’s important to know that the current price of stocks reflects future factors. For example, you’re not the only one anticipating a recession – this threat is already factored into today’s price. You can read more on Efficient Market Hypothesis to further understand this.

Secondly, it’s proven empirically time and time again that lump-sum investing is better than buying the dip, even if you are super accurate in your timings. This is because that during the time you’re waiting for the dip, the lump sum investor is making continuous gains. Before any bear market is a bull, and it can be a long one at that. Stocks take the stairs on the way up, and the elevator on the way down.

Stock Picks: Which Stocks to Choose?

So, now we know not to try and time the investments, but rather to stick with them for a long enough time to outlive dips and fluctuations, thus reaping the reward of long-term growth.

Embracing this strategy actually helps us rule out a ton of stocks for our stock picks. High growth usually means high volatility, and because we’re in it for the long haul, those short-term meme stocks become redundant. No one could possibly argue that Bed Bath & Beyond Inc. (BBBY) at $25 was one for retirement. And, if it’s not for the long-term, we should disregard it.

So, these somewhat favours value stocks overgrowth stocks; these are stocks that are considered to be good value for money, safe, and sturdy fundamentals. Essentially, not the fast-growing volatile tech stocks that are difficult to justify for the price besides the narrative of “well it will continue to grow anyway”.

Value stocks are often dividend-paying, and dividend stock are evergreen. Evergreen means that it is not under threat of becoming obsolete or out of fashion anytime soon. For example, eCommerce, Energy, and Engineering. Generally, dividend stocks fall into these categories.

Stock picking is a difficult skill, which is why it’s better to have a good mix and diversify across industries. Which strategy sounds more stable for long-term growth: having 100 fairly priced dividend stocks across 10 evergreen robust industries, or having 10 volatile expensive growth stocks all within tech? The more picks you do, the risk each individual one poses to your portfolio. This is why index investing is so powerful, too.

This is also conducive to having a passive income. Dividend stocks not only make for a less volatile portfolio, but they can create a passive monthly income for you. And you’re in less threat of dividends seizing up during a recession if you’re involved in evergreen industries with big, stable firms – many succeed in paying out during dips and recessions.

Passive investing will eradicate any desire to even succumb to the pressures of selling and timing markets – the anxiety underlying that pressure is minimal compared to high-risk growth investors. No more FOMO; no more anxiety.

Conclusion

Buying the right stocks at the right time requires a combination of thorough research, disciplined decision-making, and a clear understanding of your investment goals. By focusing on fundamentals, staying informed about market trends, and avoiding emotional biases, you can position yourself for success in the dynamic world of stock investing. Remember that investing carries inherent risks, and seeking advice from financial professionals can provide further guidance tailored to your unique circumstances.

Take Out a Loan to Invest: Is It a Good Idea?

Taking out a loan to invest is not something that many people would recommend. However, if you’re going to take the risk of investing your money in the stock market and get a higher return on your investment than what you could earn from an interest-bearing savings account or certificate of deposit, then it might be worth considering taking out a loan.

The reason most people don’t recommend this approach is that if the investment doesn’t pan out, you could be in a lot of trouble financially. When deciding whether or not to take out a loan to invest, you’ll need to weigh the pros and cons carefully. This article will help you do just that.

What Type of Loan Can I Get?

There are different types of loans that you could get for this unique situation. However, the type of loan you can get to invest will depend on your credit score and your credit history. The same-day personal loans that you can get from a bank or credit union are a good option for this type of investment. This is because the interest rates on these loans are typically lower than what you would pay on a credit card. Besides, a personal loan can be used for any purpose, so you don’t have to worry about explaining why you want the money.

How Will I Pay It Off?

The other important consideration when taking out a loan to invest is how you will pay it off. If you’re going to use the loan to buy stocks or mutual funds, then you’ll need to have a plan for paying off the loan if the market goes down and you lose money on your investment. One option is to set up an automatic payment plan that will deduct the payments for the loan from your bank account each month. This will help you avoid any late fees or penalties.

Should I Invest That Money?

This is the question that you’ll need to answer before taking out a loan to invest. The stock market is a risky investment, and there’s no guarantee that you’ll earn a profit on your money. However, if you’re comfortable with the risk and you’re willing to potentially lose some or all of your investment, then investing in stocks or mutual funds could be a good option.

Where Should I Invest It?

Another important question to answer before taking out a loan to invest is where you should invest your money. There are many different options available, and the one you choose will depend on your risk tolerance and investment goals. If you’re looking for a conservative investment, then a certificate of deposit or a government bond might be a good choice. If you’re willing to take on more risk, then you could invest in stocks or mutual funds. Besides, there are a variety of other options available, such as real estate or precious metals. You can also invest in crypto, although this is a more volatile investment.

Pros of Getting a Loan

There are several reasons why taking out a loan to invest might be a good idea. First, if you have a good credit score and a solid credit history, you could get a lower interest rate on the loan than what you would pay for a credit card. This could save you a lot of money in the long run. Second, if you have a plan for how you will pay off the loan, you can avoid any late fees or penalties. Finally, by investing in stocks or mutual funds, you could potentially earn a higher return on your investment than what you would get from an interest-bearing savings account or certificate of deposit.

Cons of Getting a Loan

There are also several reasons why taking out a loan to invest might not be a good idea. First, if the market goes down and you lose money on your investment, you could end up in debt. Second, if you can’t pay off the loan, you could end up with a high-interest rate and a lot of debt. Finally, if you’re not comfortable with the risk, you might be better off investing in a more conservative option.

In conclusion, taking out a loan to invest is a big decision that should not be taken lightly. You’ll need to weigh the pros and cons carefully before making a decision. By considering the questions in this article, you’ll be able to make an informed decision about whether or not this is the right option for you.