Imagine, it is Christmas morning and your grandmother has just given you the best gift any grandmother can give: money! You begin to count the money and realize that she has really spoiled you this year. She gave you four hundred dollars. Now you begin to think of all of the things that you could buy with that money: music, concert tickets, gas, food, some new kicks; every possibility passes through your head. Hold on one second though, what if I told you that if you play your cards right you could turn that four hundred dollars into a thousand dollars in only about a year? Interested yet? What if I told you that the four hundred dollars that you hold in your hands could potentially be the start of a new life? If I caught your attention then maybe you should consider investing your money in the stock market. If I did not catch your attention then go waste your money on what ever you want.
I have teamed up with my cousin, Andy Fecik, to inform new investors, like yourself, on when it is the best time to invest in the stock market and how you can tell if an investment is right for you. Andy is a very knowledgeable business man who has over fifty years of experience investing in the stock market. Along with his personal investments, Andy is also the leader of multiple large investment clubs/funds.
Many beginning investors, especially young ones, tend to believe everything they read. For example, although The Motley Fool is a very reliable resource for investors, a recent article that I have read from the website was very, very misleading. An article written by Bill Barker stated that the Autumn months are the best times to invest because historical statistics have proven that people who invest during the fall months usually find themselves gaining larger returns on their investments than those who invest in the spring months. Barker uses a multitude of companies and their historical information to prove his theory . However, who knows whether or not Barker picked his companies based on whether they supported his theorem or not? No one does.
In a recent phone interview, Andy stated that there is a lot of lore, or what he described as the witchcraft of the stock market, that can distort the truth of the market. This so-called lore tends to build up and become the general opinions of the market. For instance, say that Microsoft's historical background did correctly match up to his theory because investors gained greater returns in the summer months not the fall months. Barker would have probably thrown out that company. This is the issue with all tips about the stock market. People can rig their information to prove their theorem; this happens a lot. Another example of this is the saying that goes "sell in May and go away" which means to sell your stocks in May and hold your money for a few months. Well, what if the market is low in May? Are you still going to sell and possibly lose profit because of an old saying? Andy has told me a multitude of times that what new investors need to learn is that there is no specific time to invest in the market. However, the market is personalized by the specific investor. As Fecik has explained to me in the past, an intelligent investor will say that any day that a stock is at the desired price is the right day to invest. In evaluating the best time to invest, I have found that there are no specific months or seasons that are better than others, It depends significantly on the particular investment itself. In example, say you want to invest in Apple, and it has been trading at $117.75. You have $1000 set aside, and you have stated that if Apple goes down to a hundred dollars or less a share you will invest all of your $1000. When that day comes, it will be the right day to invest. No one can legitimately tell someone that one specific month is better than another when it comes to investing.
We can dig deeper into the question of when to invest by learning how to evaluate a potential investment opportunity. The most important thing that young investors need to learn about investing is that they must be interested in the company/product in which they plan to invest. This can make investing much more fun and interesting. You will actually enjoy researching the company's history and digging deeper into the future outlook of the company.
According to Andy, there are many factors that can be weighed when looking at potential investment opportunities. Outside of being interested in your investment, an investor should look for companies that are reliable. Reliability can be judged by the age of the company, the competitors of the company, the chairman's letter to the stock holder's, whether or not that company is a monopoly, and the future outlook of the company. The age of the company matters because if a company has been around for a long time and has not had too many price drops, then you know that this company should be around for many more years to come. When researching a company, a potential investor should compare and contrast the competitor companies to his/her potential investment. It is also very important to read the chairman's annual letter to the stock holders to see what kind of organization the company has. A rule of thumb is that if you can not understand the Chairman's letter, then you should immediately scrap the investment. Another factor that should be weighed is whether the company is a monopoly or not. If so then this investment is probably pretty good because no other company can do what your company does. For example, Google, Inc. is currently a monopoly of the stock market. No other company can do what Google does or its stock would not be over seven hundred dollars per share. The final factor that must be weighed is the future outlook of the company. If a company has a lot of good ideas that may lead to an increase in its earnings, then it is a good investment.
New investors also need to learn to ask themselves, Is it worth the risk? Is the company a good buy? and have I done enough research? If you answer no to any of those questions then you need to review your potential investment and look at other options. When evaluating your company you can also look for patterns in a company's historical prices chart or graph. If you find a cycle that occurs more than twice, then it is likely that the cycle is continuous and you should watch for particular parts of that cycle to occur. For example, say a company's stock is always about twenty dollars in February but by September of that year is has reached thirty-five dollars, and then slowly drops back to twenty dollars the following February. Perhaps you should consider buying the stock in February with the intention of holding the stock until September.
One final thing about investing that young investors need to learn is that you don't make money overnight. You must be patient and let your investments ride. You can not get too skeptical if your company experiences a bad
In evaluating the stock market, I have found that there is no specific good or bad time to invest. It is the right time to invest when the price of the company you wish to invest in is equal to or less than the price you are willing to pay. I have also found that if beginning investors follow Andy's guidelines for evaluating a stock, then they should be successful.
So what have you decided to do with that four hundred dollars that your grandma gave you? Are you going to go out and blow it on food and clothes? or are you going to invest it and turn that four hundred dollars into thousands of dollars that can help pay for your dream car?
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