Buying and selling stocks and shares is something that more and more people are doing on their own, without using a fund manager or broker. There is a lot of information online and in books that you can use to help you but it can be a confusing business and it can make people prone to panic. This means that they can buy and sell at times when it is not wise to do so. Therefore below are five tips on when the best times are to buy and sell.
When the stock market is high
When the stock market goes up then people have more confidence in it, they are more likely to buy shares. However, this is the best time to sell, because prices are high and the worst time to buy as you will get less for your money. Therefore when the market is high it is best to sell rather than buy.
When the stock market is low
When the stock market is doing badly people tend to panic, they stop buying or sell what they have. However, if you buy when prices are low, you get more shares for your money. If you sell when prices are low you probably make a loss on your investment. So buy when prices are low so that you get lots of units and when the prices go back up your investments will rise in value.
When a company makes a profit
If a company makes a profit, then the stock prices tend to rise. This means that people have more faith in it. However, buying shares at this point will be expensive but selling them could be really profitable. You may not want to sell as they are doing well, but if you need money it is a good time to cash in.
When a company makes a loss
If a company announces a loss then many people tend to sell their shares as they lose faith in the company. The problem is that a loss will also cause share prices to fall, so selling will mean that you will not get a good price for the shares. It is better not to panic and to wait until prices rise again before selling.
When you need the money
The best time to sell shares is really when you need the money. As a stock market investment should always be a long term one, then you should aim to keep money invested for five years minimum and preferably longer. This means that when you need to draw out the money, you should find that the investment has increased in value. This will be particularly true if you have bought shares when they are cheap or bought them regularly so that the price was evened out across the term.
Image courtesy of Ahmad Nahwawi