Financial Freedom SG

There are some investors who believe that it is possible to time the market and buy at the bottom of the market and sell at the peak. But can it be done? Anyone who suggest that they have found a way to do it or thinks they have a formula to to do so, you should steer far away from them. They are either looneys or someone out to pull a fast one on you.

A spectulator (according to The Intelligent Investor-by Benjamin Graham) is one whose 'primary interest lies in anticipating and profiting from market fluctuations, whereas an investor's primary interest lies in acquiring and holding suitable securities at suitable prices.' If you follow this definition, a real investor will never buy a stock because it has gone up or sell one when it has fallen. A real investor will likely not know the prices of the various securities he or she has as they will have taken this market fluctuations into account when they buy a stock.

A spectulator however, thinks it is possible to identify and buy a stock when prices are low and constantly tries to guess which way a stock will go. They are likely to be glued for a long time to the screens of the computer or tv at the stocks which they owned or are interested to get. And they will look at charts, go to forums to get tips about stocks which are likely to go up or down and pester friends, colleagues and the remisier for tips on market direction.

An investor looks for stocks with value which are discounted either because of bad news or lack of coverage. This is what Warren Buffet and Benjamin Graham advocates and they are very successful using this approach to investing. There was once I read something about Warren Buffet that said that he spends his time reading annual reports or prospectus on companies they are interested in buying.

As my article on dollar cost averaging stated, it is better not to try to time the market but constantly stay invested (until the P/E ratio is at ridiculous levels) and invest a regular sum each month. So the only timing you need is when to liquidate the shares you have and convert it to money that you can use for your retirement.

Remember, anyone that can promise to buy at low prices and sell at high prices always would be better off trading on his or her own instead of going around announcing to one and all about the benefits of their trading system.