Is now the time to buy shares?

Happy Girl

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Is now the right time to buy into the stock market with recent share prices dropping so dramatically. Or is it as straightforward as buying when share prices are low
 
Re: Is now the time to buy shares

Is now the right time to buy into the stock market with recent share prices dropping so dramatically. Or is it as straightforward as buying when share prices are low

Beware trying to catch falling knives!

Personally Im going to put my SSIA back into an idex fund after missing the dip luckily for the epriod I removed it. I lost 10% on the nalance I left in it over that period.
 
Re: Is now the time to buy shares

The stock market is driven by a mixture of fear and greed.

Personally I'm worried about a dead cat bounce and this will probably cause me to miss out on the bottom.


Murt
 
Re: Is now the time to buy shares

Get the gist of what you all talking bout but surely if I have no investment time limitations then surely there has to be a big advantage buying now. Does it not mean that it minimises possible future drops and maximises future increases. Have I got things wrong here!
 
Re: Is now the time to buy shares

Susang, what ClubMan means is that the best over all performance you can achive is via dollar cost averaging. You can't predict market movements and if you time your purchase strategy purely by when you 'think' the market is low you could be in for a few surprises (market timing is a black art that although people profess to be able to do it achives dubious gains over time).

Is now currently a good buying oppertunity. It might be.
Then again the market could get a lot worse (thinking Black Monday in 87 I think it was?). If you buy now and it goes further south does that make your purchase a bad one because you didn't time it well. Of course not. If you buy now you are getting stocks at a discount to what they were just before the new year. If they go further lower and you keep buying you decrease the overall average cost of your holding and therein lies the wisdom of clubman's statement. Over time this mechanism should give you decent returns.

If you want to invest in the market the right time is whenever you are ready , rather than the market.
 
Re: Is now the time to buy shares

Dollar Cost Averaging is the right play. Why don't you try buying half of what you planned to buy now and, if the market falls further maybe 10-20%, put in the other half? Or do it in quarters every 5% drop. You won't get in at the bottom but you won't get in at a peak either.

The beauty of DCA is that you get more for your money when the price is low, so you will get in closer to the bottom than the top.
 
Re: Is now the time to buy shares

DCA is fair enough if the thought of buying near a top is keeping one awake at night, but it's worth noting that there's a ton of academic research which shows that returns via a DCA approach are almost invariably worse than investing a lump sum.
 
Re: Is now the time to buy shares

Is now the right time to buy into the stock market with recent share prices dropping so dramatically. Or is it as straightforward as buying when share prices are low
Now is a better time than last week.
 
Re: Is now the time to buy shares

Is now the right time to buy into the stock market with recent share prices dropping so dramatically.

Remember what Mark Twain said about March - this is one of the peculiarly dangerous months in which to speculate in stocks. The others are July, January, September, April, November, May, October, June, December, August, and February.
 
Re: Is now the time to buy shares

Remember what Mark Twain said about March - this is one of the peculiarly dangerous months in which to speculate in stocks. The others are July, January, September, April, November, May, October, June, December, August, and February.

PMU I love it!
 
Re: Is now the time to buy shares

DCA is fair enough if the thought of buying near a top is keeping one awake at night, but it's worth noting that there's a ton of academic research which shows that returns via a DCA approach are almost invariably worse than investing a lump sum.

This is true. If you have an investment time frame of ten years or more then buy and hold is a better strategy than DCA. If you which to split your investment between asset classes, then periodic portfolio rebalancing performs slightly better than splitting your lump sum between the asset classes and leaving them. However, on any papers I have seen transaction costs have not been accounted for so it could be argued that buy and hold is the best strategy overall.

Either way, if you have a lump sum to invest in the stock market and are prepared to invest for ten years (the minimum I think for stock market investment), DCA will offer a worse return than simply investing the lump sum right now.
 
Re: Is now the time to buy shares

Now is a better time than last week.
Not necessarily. Just because prices are lower this week than last doesn't necessarily mean that they are better value or that returns are likely to be better into the future.
 
Re: Is now the time to buy shares

Not necessarily. Just because prices are lower this week than last doesn't necessarily mean that they are better value or that returns are likely to be better into the future.
The parent poster didn't claim that. If you are buying a stock then surely your initial investment will return a larger gain if you buy after their price has been depressed.
 
Re: Is now the time to buy shares

Not necessarily. Just because prices are lower this week than last doesn't necessarily mean that they are better value or that returns are likely to be better into the future.

Yes, they are better value. And I can gaurantee that you will get better returns investing now than if you invested last week.
 
Re: Is now the time to buy shares

Grand so - let me know when I should cash in to maximise my returns please.
 
Re: Is now the time to buy shares

red joker..you cant guarantee anything. Are you God?
 
Re: Is now the time to buy shares

red joker..you cant guarantee anything. Are you God?

Don't think he's God, but he is right in guaranteeing that returns will be better for those who invested this week as opposed to last. Even if the market goes down for the next ten years, the person who invested this week will have lost less money.
 
Re: Is now the time to buy shares

DCA is fair enough if the thought of buying near a top is keeping one awake at night, but it's worth noting that there's a ton of academic research which shows that returns via a DCA approach are almost invariably worse than investing a lump sum.
Could you be more specific about the conditions where this would hold? I can accept that sticking 100k cash under the mattress and buying 5k of stock each year for 20 years would perform more poorly than investing the 100k at the start of the period. However I would also imagine that saving up your money over a period of 20 years until you have a 100k lump sum to invest would perform more poorly than investing 5k at the end of each year. And in between there is a whole range of situations many of which will show a significant reduction in volatility without adversely affecting growth by using DCA.

In other words, I don't accept that "returns via a DCA approach are almost invariably worse than investing a lump sum". I think that under some conditions (like the example I gave above), it may be true. However I believe under many cases, it would be false especially as most people get their wealth through income.
 
Re: Is now the time to buy shares

Could you be more specific about the conditions where this would hold? I can accept that sticking 100k cash under the mattress and buying 5k of stock each year for 20 years would perform more poorly than investing the 100k at the start of the period. However I would also imagine that saving up your money over a period of 20 years until you have a 100k lump sum to invest would perform more poorly than investing 5k at the end of each year. And in between there is a whole range of situations many of which will show a significant reduction in volatility without adversely affecting growth by using DCA.

In other words, I don't accept that "returns via a DCA approach are almost invariably worse than investing a lump sum". I think that under some conditions (like the example I gave above), it may be true. However I believe under many cases, it would be false especially as most people get their wealth through income.

The saving and investing a lump sum every year approach you have outlined is generally considered a "buy and hold" strategy rather than DCA.

Say you have €100k to invest in both the stock market and low risk bonds. You wish to split your allocation between the two asset classes 50/50. However, you are worried about trying to time your entry into a volatile risky class like stocks so your broker advises you to put the lot in bonds and transfer €5k per year from bonds to stocks.

Numerical and empirical research suggests there is a very high probability that the brokers strategy will underperform either

1) Putting €50k into bonds and stocks and leaving them for ten years
2) Putting €50k into both and periodically rebalancing the portfolio so that the assets are evenly divided.

Option 2 should perform the best overall but not by much. Both 1 and 2 will massively outperform DCA.
 
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