Dont ask me if I follow this or not. But I think essentially this is the formula.
As any savvy investor knows, Stock market basically goes up and comes down not necessarily in that order and not bound to same frequency. All you have to do is buy low and sell high. In a volatile market, the buy low and sell high period might be short and in a stable market it might be high. And the key ofcourse is to know when to buy. A rule of thumb is buy when everybody says, markets are falling - markets are falling. And sell the day your stock has appreciated by more than 20% (You dont have to wait in never ending optimism of making your stock appreciate by 2000%).
If you observe, the stock market index is standing at the same level in 2006 and today. But during these two years, the market has doubled and came back. Which means, you could have potentially invested 1L in 2006 and got returns of 2L in 2007 (had you sold) and you have perfect opportunity to invest your profit money again. So, the key is selling when the markets are high.
As any savvy investor knows, Stock market basically goes up and comes down not necessarily in that order and not bound to same frequency. All you have to do is buy low and sell high. In a volatile market, the buy low and sell high period might be short and in a stable market it might be high. And the key ofcourse is to know when to buy. A rule of thumb is buy when everybody says, markets are falling - markets are falling. And sell the day your stock has appreciated by more than 20% (You dont have to wait in never ending optimism of making your stock appreciate by 2000%).
If you observe, the stock market index is standing at the same level in 2006 and today. But during these two years, the market has doubled and came back. Which means, you could have potentially invested 1L in 2006 and got returns of 2L in 2007 (had you sold) and you have perfect opportunity to invest your profit money again. So, the key is selling when the markets are high.
2 comments:
Its really great hearing the fundamentals of stocks and really enlightening how simple it is to make money , I thought it was one of the toughest thing.
I heard the same in the movie "SUPERMAN" where Gene Hackman the villain says the fundamental of real estate business is to buy land cheap and sell it at high price.
:-) Well I really like your approach which is "the ideal" approach however tapping the market at its low and moreover defining "Low" is something which is the art of invesing here
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