Is this the perfect time to invest? (Newbie)
- Thread starter RastaMouse
- Start date
See you at 2500
If you look at it from a long term growth standpoint, the market has never not recovered from a big selloff. So assuming you believe we will hit new highs between now and when you need to withdraw the cash, then sure its a great time. But you got to be in it for the long haul and need to understand that the market has a lot of room to the downside. There are a lot of serious macroeconomic issues right now. There have been for a while. We also just dipped 15% off an all time high. If you're sitting on cash looking to invest long term, why not slowly ease into the market. Invest 25% now and systematically invest a small percentage more each week. Put uninvested cash in something safe that produces a yield.
For once dozu and his pro boys aren't wrong. Buying on the way down isn't a bad strategy and, to be frank, is basically the way someone is going to have to build a position.
The biggest mistake you can make is sitting on the sidelines until the bottom and then waiting and waiting and waiting.
I'm buying right now. Not much, but a few ETFs I own I'm purchasing more shares in. I know what they hold and I know what their value should be at. If the market drops, I'll put a little more in. I'm not contributing in my retirement much for every drop. But every drop I bring my average cost down a little more. For us millennials, this will probably be the only time in the next decade that we will be able to acquire stock at a price that could fund a retirement.
Thanks for all the helpful replies guys. Just two more questions if you don't mind.
1. I was advised to buy when it's on the way back up rather than down, as that's when you know the scare is over. From an experienced opinion, would the current market be too volatile for me to catch the build up and just bounce back to position thus missing the opportunity?
2. Do you guys think we're in for a bear market now for the foreseeable future? And how long do you think this drop will last for? I'm just trying to gauge an idea of how long I should expect to hold my money in the investment (months, years etc.).
Thanks
1. I was advised to buy when it's on the way back up rather than down, as that's when you know the scare is over. From an experienced opinion, would the current market be too volatile for me to catch the build up and just bounce back to position thus missing the opportunity?
2. Do you guys think we're in for a bear market now for the foreseeable future? And how long do you think this drop will last for? I'm just trying to gauge an idea of how long I should expect to hold my money in the investment (months, years etc.).
Thanks
Just a thought experiment.
Buying on the way up rather than buying on the way down.
Let's say you buy 1/3 three times. Smaller line are purchases. Bold one is average price.
Red lines is when you buy on the way down. Green lines is buying the way up.
Situation 1
Situation 2
On both situation.
Average buy on the way up beats Average buy on the way down.
In situation 1 you bought before another correction so we never know.
In situation 2 you bought before a big rally so you're good.
Question 2 is tough to answer.
To tell where and when is a gamble.
No one can know for sure and the little uncertainty can f*ck you up.
It's like saying plane are safe but you can still crash on your next flight (Sorry).
There will always be risk.
At worst you can buy some kind of hedge.
Allocate 5% of your portfolio to buy these insurance (OTM options)
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It depends on what your risk tolerance is. If you invest all your 50k now and then see it drop down to 25k in the following 1~3 weeks, how would you feel about it? If this would scare you a lot, then it is better to wait until the current strong volatility has passed.
My impression is that prices are currently dropping very fast because many companies are giving a negative business outlook, but they can't quantify how bad it will be. Many other companies keep quiet because they don't know what to say, don't know how bad it will be. The stock price drop will stop by the time the companies know how bad their business outlook will be, and by the time they get their supply lines and production lines back under control. Then there will be a gradual improvement in business conditions, resulting in a gradual increase of stock prices. The way back up will be much, much slower than we way down which we've seen last week.
How long will that take? Difficult to say, and will probably depend per industry sector. Some sectors may recover faster than others.
When the market is rising or falling, no one really knows how far or how long, that's because there can be a number of reasons for why it's moving, it's not just one reason.
I'm going to give you an example of a stock to buy NOW which is nearly foolproof, it's an example because you can use this example anytime in your trading life.
FMG Fortescue Minerals supplies Iron Ore, predominantly to China, currently it has a PE of 4.
Now a PE of 4 is dirt cheap and indicates possibly the market doesn't really like or trust it.
If you look at a 20 year chart, in that time has gained 60,000%
The net profit margin atm is 39%.
This sort of Co. is one you can buy anytime, it may hit turbulence, but you should be able to sleep soundly any night no matter what, bull or bear.
Don't back up the truck, just take a modest position as there are other like it if you look.
RH scale is percentage, 20 years.
Thanks a lot guys. A lot of useful information in here. I'm gonna go through each post, do thorough research over this weeekend and see what the market looks like Monday and take it from there. Any other help is appreciated as always but thanks for all the contributions this far.