There are many different theories on when is the right time to buy into a stock market that seems to just keep going down. Right now, it seems the bad news just keeps on coming and there is no end to the falling stock market.
This is a difficult time for any investor and especially for stock market beginners. Is now the right time to jump in? Should we wait? Should be just keep our money safe in our bank account? Or maybe this is the turning point that will change the stock market forever.
In the 1970's and early 1980's there was a very long period where the stock market did nothing at all. Could we be seeing the beginning of something like that? No one knows, of course, but if history repeats itself then it is still not time to jump back into the stock market.
History has shown that the proper time to jump back in is when the market keeps going down for a protracted period (as is happening now) and then there is a period of one day to several days where it gets REALLY bad. This is something about the stock market for beginners that they would not know or understand.
Yes the stock market has had an awful year and yes it has had some bad days, but it has yet to have a day or two where the market seems to fall off a cliff. I am waiting for that day or two where everybody and their brother are selling every stock all day long. I am waiting for those several days when it seems like the end of the world is coming and that there is no possibility of anything ever recovering. When there is a serious panic in the streets, that is when I will start buying this stock market. That is when the bottom is near and the turn around will happen.
IS IT TIME TO BUY THE STOCK MARKET?
STOCK DIVERSIFICATION FOR BEGINNERS
Over the past several decades, people on Wall Street have preached the virtues of stock diversification, drilling it into the minds of every investor within earshot. Even stock market beginners or dummies have heard about diversification. Everyone from the CEO to the delivery boy knows that you shouldn't keep all your eggs in one basket - but there's much more to it than that. You shouldn't go on financial tips alone...you need to diversify and study your options.
The concept of "don't put all your eggs in one basket" is a wise one for those who are unable or unwilling to evaluate the attractiveness of investment opportunities. But as it happens, excessive diversification presents a serious hurdle to wealth building.
There undoubtedly is less risk in holding a concentrated portfolio of well researched investments than holding so many stocks your returns are bound to be nothing more than average. The ideal portfolio size, depending on your net wealth, may be between 5 and 20 stocks. It is better to have a smaller group of well researched and understood stocks than it is to have a sizable laundry list of all the popular companies. For it is much easier to find 5 exceptional opportunities than 25.
