How Do I Know When To Buy?

The old adage of “buy low and sell high” could not be any more true than in the current market climate.  Because the market is at historic lows, this is a rare opportunity to buy low, allow your stocks to sit for awhile, reap the benefits of a future economic upswing, and make profits.  Furthermore, because the price of stocks are low, the average investor can buy many more shares, thus allowing potential returns to be greater than if you only held a smaller number of shares.


Buying in a down market results in “cost averaging,” which means that you have a greater opportunity to garner large gains in the future.  However, there is more to understanding when to buy stocks than simply “buy low, sell high” or “buy in a down market.”  The following are tips to help you decide when to buy stocks in order to maximize your future returns.

Tips About When To Buy

1.) First, be sure that you are well-educated.  Do your necessary research.  With the Internet at your fingertips, you are easily able to research the company, the industry, and any fees you may incur from purchasing stocks.  A great place to start is the online version of the Wall Street Journal.

2.) Know the company.  Even if a stock is at a historically low price, you may not want to buy.  Consider whether a rebound is expected and, if so, what time frame this will require.  You want to purchase stocks in a healthy company that will see future returns, not one that is on a fatal path downward.

3.) Know the industry.  For example, the entire U.S. auto industry is struggling, so understanding GM requires understanding the entire industry.  Some industries, such as healthcare and education, are strong and will continue to go in the future.  However, you may find fiercer competition in a robust industry, so selection of the market leader in these industries is critical.

4.) Research fees that are associated with buying and selling stocks.  These fees directly eat up your profits.  Because of this, it is often beneficial to buy stocks in bulk and hold for awhile, rather than buying and selling rapidly.  Also, consider the use of an online service that charges much lower fees, rather than employing a broker, which will also eat up your profits.

5.) Trust your gut.  Money, including investments, are tied to emotion.  Follow research and advice, but ultimately trust your gut.  Make decisions so that you will be able to sleep well at night.

Related posts:

1. How Do I Know When To Sell?
2. Do I Need A Stock Broker?
3. What Is A Low Stock?
4. How To Get Started In Stock Trading
5. What Is A Share?