Published: July 2, 2020 | Updated: October 12, 2020 | Posted by: Moneymax | Personal Finance
More Filipinos are trying their hands in trading, with stock market accounts increasing by 61% in 2018. While stocks aren’t guaranteed, it gives investors the chance to grow their money at a rate that other investments cannot. However, trading is not a walk in the park as market volatility can intimidate both newbie and seasoned traders. If you’re not careful, you may experience losses even before you make your first buck.
Before entering the market, you need to learn the basic principles and keep practicing and investing. You should also know when to buy stocks which can help produce a profitable result.
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The answer is when stocks reach low points. It is where the market timing comes into play. Past performance doesn’t guarantee future performance. However, always remember the cycle. Past performance may be an indicator of future performance.
The opening hours represent the window in which the market factors in all the events and news releases since the previous closing bell, which contributes to price volatility.
For an expert trader, the first 15 minutes of the day is prime time. It can offer some of the best trades of the day based on initial trends. 9:30 AM to 10:30 AM is often one of the best hours to trade. If you want to extend your day trading hours, you can buy stocks until 11:30 AM. However, a lot of traders typically stop trading during this hour because volatility and volume tend to slow down during this time.
If you’re a newbie trader, you may want to avoid trading during the first hours of the day. It can be hard analyzing the best patterns to make a profit during this period, which may result in losses if you’re not careful.
Monday is the best day to buy stocks because the market tends to drop during the start of the week. The reason for this is uncertain. Studies attributed this drop to the amount of bad news released over the weekend. It may be because of investors’ gloomy attitude about going back to work at the start of the week, leading to pessimism over investments. Nevertheless, Monday is your best time to buy stocks during the week.
It’s the start of the new year, and this means people have just received their bonus and extra cash during the holiday season. Having more money means being able to buy more stocks. You can use part of your 13th month or year-end bonus to buy more shares. With more buyers in the market, share prices tend to increase in value, so if you’re still asking when to buy stocks, it’s best to buy before the month ends.
Often considered the ghost month, August sees stock prices taking a dip. Value turnover during ghost month is lower because fund managers typically go abroad for vacation, while superstitious investors hit pause during this period. In fact, for 10 ghost months from 2009 to 2018 the Philippine Stock Exchange performed well. The PSE only recorded a loss of 0.39% on average during August.
As the ghost month ends, the market is beginning to pick up its pace. It’s the start of the last quarter of the year, and investors are rallying to maximize their investments before the year ends. How the first quarter ends can determine or serve as a reference for the direction of the market in the coming year. No investor or corporation wants to end the year in a negative light.
Prices tend to drop during the end of December because investors (both individuals and fund managers of corporations) usually sell their shares at a loss. They can declare their losses as capital losses, which can be deducted from their capital gains taxes. This, in turn, results in investors paying less in taxes because their capital gains decreased. More sellers in the market, who want to take advantage of deductions from capital losses, drive the price of stocks downwards.
Before you spend your hard-earned money, make sure to look at various indicators to determine if you should buy a company’s stocks. Here are some factors to consider:
No one can really determine the market’s movement with 100% accuracy. However, historical data tells us that the stock market follows a typical cycle with three trends—upwards, downwards, and sideways. What goes up must come down, and what goes down must come up. Purchase stocks when the market is down and sell when they are up. Moreover, consider various factors such as a company’s free cash flow, stability, and earning when choosing where to buy stocks.
With a goal to help Filipinos lead healthier financial lives, Moneymax regularly publishes tips and tricks on personal finance and lifestyle, among many other topics. For more finance-related news and articles, follow Moneymax on Linkedin.