The stock market has been very volatile for the past month. During these times, there was a record number of withdrawals from mutual funds as people get scared of being invested in equities. We know this is normal because this is just emotions playing games on us. We know that when everyone is scared about investing in stocks, it means that everyone who will sell stocks have already sold, a sign of a bottom. We also know that when everyone is talking about the stock market never going down, it means that a crash is likely.
During the last month, I have increased my exposure to stocks. Other than continuing to contribute to my 401k, I have moved 30% of my cash holdings into the stock market. Although the stocks I purchased with additional money increased in value, I’m not prepared to say that this strategy has worked because my goal is not for short term gain. I believe that if I always buy stocks when everyone is scared and sell stocks when everyone is complacent, I will be able to practice “buy low, sell high”.
As my goal is financial freedom in the long run, I feel that I’m on the right track with this approach. Sure, I might be termed a “knife catcher” from time to time, but what I know is that I will never be the person who buys at the absolute top. This not only allows me to stay optimistic about my investing future and also keep me invested when times are bad, it will also instill a much needed discipline in me.
I understand that this may or may not work for you, and is way over simplified. I’m also not saying that you have to follow my approach. I just want to share with you what’s been working for me, as I hope that every reader of this will eventually be financially free.
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{ 12 comments… read them below or add one }
Great post! This makes me wonder why I haven’t taken the time to study the stock market
-Mike
The stock market can be very risky, but it’s a really good investment if you do your homework and stay on top of it. Best of luck to ya on your stocks. Did you hear that some people are predicting Google to go up to $2k per share? Crazy
I agree that it’s a good time to buy more stocks. Companies are getting hammered right now, and a lot of them for not real good reason.
One really gamble on stockmarket. But for one to surely win, a good study of market movement and strategy will lead to good profits.
Yup, I’m buying to. I love it when I hear everyone worrying about recession, real estate, banks, etc.
are you sure thats not “Billy” telling you what to do
I buy stock based on the potential grow of a company regardless of market condition because I buy stock for long term investment.
If you go in with the right mindset, the stock market can be a sound investment. Rather than “gambling”, if you spread your assets in a range of well-chosen stocks, your investment will weather the up and downs of the market (as overall, the market has grown).
This is the correct way to trade the stock market.
My own stock market system is built around these principles:
Buy a diversified portfolio of stocks.
Don’t short-term trade.
Buy low sell high.
I have a trading example of the power of buying low and selling high on my book’s website: http://www.stocktradingriches.com/
While i still own stocks, i’m a big fan of diversifying into real estate.
I have a CPA who taught me how to do so out of my solo 401k (he calls it a small business 401k) and i’m digging it. Invest and profits are tax deferred…
You can have control of your retirement asset to invest (given certain conditions so he tells me), but it is pretty cool.
His whitepaper is aimed at CPAs, not consumers, but with an accountant or advisor helping out, you could create a plan and invest in a franchise, in real estate, in stocks, almost anything.
TJ
his site is: http://www.mybusiness401k.com
Great post! This makes me wonder why I haven’t taken the time to study the stock market.
This is the correct way to trade the stock market.
How is your etrade stock doing?