Putting your hard-earned cash in the stock market can undoubtedly invoke fear. There’s no point in buying when the prices are at an all-time high. Today, uncertainty prevails over the stock market. So, answering the question of when is the best time to buy stock market is more challenging than ever.
In the words of Warren Buffet, the sooner you buy stocks, the better. He gives sound advice of not waiting to buy stocks but buying stocks and waiting. But before that, it is important to time the market accurately.
If you are a new investor, remember that stock markets always get back on track, and investors quickly regain their losses. This article will delve deep into the best periods of the year to buy stock.
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The Best Time to Invest in Stocks
To gain a deeper understanding of the right time to invest in stocks, you must know about the optimal times of the day, week, month, and year. Understanding it will help you decide confidently about the investment.
The ideal time of the day to purchase stocks
The stock market opens on weekdays from 9:30 AM onward. You must avoid stock trading the moment markets open. This is because, at this time, the corporate news that breaks in is about trades that haven’t settled.
New investors cannot understand the corporate news, geopolitical events, and factors that influence the market. So, it is best to wait till the market stabilizes in the day.
Some of the biggest trades happen after the opening bell at 9:30 AM. But at this time, the market is also volatile. If you are not much concerned about this volatility, go ahead and buy stocks.
You may wait until 11:30 AM if market volatility terrifies you. At this point of time in the day, investors have traded, and those who have left some open positions are trying to close them.
Traders are trying to close open positions between 3 to 4 PM because they don’t desire to leave them open when trading isn’t occurring. A sound recommendation would be to purchase stocks between 11:30 AM and 2:00 PM when the prices are stable.
The ideal time of the week to purchase stocks
Many people ask, when is the best time to buy stock market during the week? They are under the assumption that the market dips most on Mondays. There’s a general myth behind this assumption that since people aren’t happy to return to work on Mondays, it leads to a pessimistic market.
However, there has been no real evidence of this happening for the past four decades. In other words, how the market performs on Mondays is not much different from its performance on other weekdays or weekends.
In fact, experienced traders often see Monday as the best day to buy stocks. This is because of the time and the accumulated demand since last Friday’s stock trading session.
What does it indicate for you as a buyer? It implies that you can buy stocks any day of the week, provided you have the necessary cash.
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What is the most suitable day in a month to buy stocks
There isn’t any specific day in any month that is perfect for buying stocks. But because new money flows directed to mutual funds increase at the start of every month, the stocks rise.
Apart from this, fund managers usually buy high-performing stocks to make their balance sheets look well at the end of a quarter. So, stock prices fall midway through every month.
Try to time your stock purchases during the midpoints of months, anywhere from the 10th to the 15th day.
The ideal time of the year to purchase stocks
Stock markets usually have the strongest returns when the year commences. For example, from 1950 through 2017, the monthly average returns for the S&P 500 were highest from January to April.
Remember that markets go down during September. October is another year when the markets go up. This seasonal pattern will help you find the right time to buy stocks.
What Does It Mean to ‘Buy the Dip’?
If you are a new investor asking when is the best time to buy stock market, you wouldn’t be familiar with the term ‘buy the dip.’ But every experienced trader is aware of it and uses it to their advantage.
When a stock’s price drops after being high for a while, new investors quickly sell. But experienced traders use this situation to get more shares. They add to their current holdings at a competitive price. It is lower than the price of the shares they purchased earlier.
Buying the dip enables traders to reduce the average price they pay for shares of a company. It, in turn, makes them enter a more profitable position. This strategy is perfect for those wanting to boost long-term returns.
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Why Time in the Market and Not Market Timing Is Important for Investors?
Time in the market refers to being a long-term stock investor. It is way more beneficial than trying to time the market and buy stocks. This is because of many reasons.
The stock market keeps fluctuating due to unexpected political events or sudden waves of restrictions. Only very few investors can predict market shifts they gain any significant advantage over long-term investors.
The stock market shifts prompt investors to sell some or all of their investments to prevent themselves from losing all their money. But the more time in the market you have, which means if you are a long-time investor, you will stay invested in the market even during downturns.
Another reason is that the buy-and-hold strategy work better. According to studies, the value of being in the market for a long time is more than being there for a few of the best days or months.
There have been many examples of investors investing money at the beginning of the year and finding that its value has doubled or tripled.
Summing up
You can now confidently answer when is the best time to buy stock market? Do it irrespective of the market condition. But be sure that you are there in it for the long term. No one can escape market volatility and make accurate predictions consistently. Markets also recover quickly, so those who swim against the odds always find themselves with higher returns.