The Investor Diary Entry #7: January 23, 2023
There are many questions that pop up in the mind of someone who is getting his/her feet wet into investment, and specifically into the stock market. One of those questions is what is the best time to invest in stocks.
I am grateful that this question never popped in my mind, and that I never gave any time. I believe as an investor, even if you are an active investor, this question is of no value at all to any investor.
In my point of view a trader might ask such a question, and some traders might have an opinion on this matter, especially when it comes to the time the market is known to move in a way that traders can benefit from, as opposed to times that the market is slow.
If you are a passive investor you should never even ask this question. A passive investor invests month in and month out on regular basis without a look at time.
For an investor, it is the price an investor is willing to pay to buy a stock in relation to the expected or estimated future cash flows of a company. This is not for all investors or investment strategies; this can be the case for what is called value investment.
Investors who follow the growth investment strategies might not agree with the previous paragraph, and that is fine. We will not get deeper into the investment strategies and/or methodologies. The important thing here, is that time is not the factor to consider when someone wants to invest.
What are the factors to take into consideration when trying to invest?
What Factors To Consider When Investing In Stocks?
We agreed that “time” is not one of the factors to consider when investing in stocks. Then, what is it that one should look for when investing in stocks?
My humble opinion is that one should educate himself/herself before venturing into the world of investing. I say the world of investing in general, and not only stocks.
Read, listen, watch, and discuss. Do anything and everything to educate yourself. Once you educate yourself, then you will have a good idea about the factors that matter to you to look into before investing in stocks.
What Factors Do I Consider When I Pick A Stock?
When I first started in January 2022, I had no clue where to start, and which company to study. Let alone not knowing what are the things that I needed to study in a company.
First I got introduced to website that is full of articles, news, and videos that talk about individual companies. At the time I didn’t know anything about growth or value investing. In this website, they would advise to look into certain companies that they promote through their different services and say that those stock have a big probability to grow.
I would pick those company names and start reading about them in the news. At the same time I was trying to watch video tutorials on the things that investors look for in a company to make buying their buying decisions.
From different tutorials I gathered some financial indicators that needed to be study with the financial documents of each company; income statement, balance sheet and the cash flow statement.
There was one thing that I am grateful that I did without knowing that it was a good thing, is that from the companies that the website advised I picked the ones that I already know about. Meaning, that I would look into companies I heard of before, and I know their business.
Now the factors that I look into to pick stocks to invest in are as follows:
My Investing Factors In Brief
– A company that I know: The company needs to be one that either dealt with its brand before, or one that when I read about it, I understood what they do and how they make their money.
– Either I believe that the industry is going to grow in the future, or from studying the financial statements I estimate potential growth, or by analyzing the news related to this company I see there could be a potential.
– I run a future cash flow calculation to decide what is the price that I am willing to buy a particular company’s stock at. If the current price is below my calculation, I buy a small amount and put notification alarms for a lower price to buy more.
If the stock price is above and I want to invest in this company, then I put a notification for when the price hits my target mark or below.
These are my factors. These factors are still under development, and I am still learning and will keep on learning to know how to pick stocks. Again, these are my factors. These factors are not THE factors, nor are they factors to be copied. Every single investor has his/her own way to pick stocks. This is of course for those who are active investors and would like to pick their own stocks.
My Plan For My Portfolio
As of writing this article I have stocks in 25 companies and several ones waiting in the notifications area. Every day I have a time slot to look into new stock opportunities, but today I realized that it has been one year since I started investing, and since I have 25 companies within my portfolio, I need to run an analysis on the included companies to know where each of those companies stand today, in terms of financial performance and in terms of valuation.
This analysis will affect different areas including adjusting the notifications and target prices. When target prices change, also buying decisions change, and some companies might now be more appealing to buy.
Conclusion
It is not “time” that you want to look into when you are trying to pick stocks for yourself, what you need to establish first is your investment style, investment strategy and the investment factors which collectively will drive your investment decisions.
Self education in any field is very important. Staying as much as possible on top of the current information in your field, whatever your field is, is of extreme importance if you wish to succeed.
The world of investment is no different. For many this world is very difficult and hard to understand. That is fine, not every body can be a doctor or a herbalist, but if you want to enter the world of investment and you want to succeed, learn and keep learning and create your own investing process. There is no shame in copying, some of the very big names in investing did the copycat strategy, but apply the copycat investing strategy in your own way and do it after studying very well the strategy that you are copying.
As for me, I will stop looking into new opportunities for now, and concentrate on studying my own portfolio and update my data on those companies.
The Investor
Monday 23 January 2023
About The Author
I started to look into individual stocks in January 2022. I created this diary initially for myself to track my investing progress, and second as a place that I can share my ideas publicly hoping that others will share their ideas and learn from each other, and lastly as an online business where some links that I share are affiliate links, and if anybody bought anything by clicking those links I will get a commission based on that successful sale, which of course will not affect the price that you are buying the product or service at.
For a more detailed information on my affiliate disclosure please refer to the Full Affiliate Disclosure page, and if you are interested in building your own online business you can check this post here.
Furthermore, this site is in no way or form is giving any financial or investing advice, nor it is encouraging or discouraging people to buy or sell any financial instrument. This is a personal diary in which I track my own progress and share for informational, educational and entertainment purposes.
To the Investor.
Thank you for sharing you knowledge, experience and investment expertise. I have been pondering about when, where, and how to go about investing in stock. Your website has given me a great introduction into the world of investments. I, particularly love what you say about self-education, investment style, investment strategies and investment factors. Your site is a treasure trove of investment information.
Rachele
Hello Rachele,
I am very glad that my diary entries caught your attention.. unlike any other field that I got into in my life, I found that the education part in the investment world is very exciting. Normally, entering any field, the education part is something one wants to rid of and start the application as soon as possible.
In the world of investment the educational part is extremely exciting, and it pays off when the actual application happens.
If I had to do it all over again, I would spend more time on my investment education, and then on making decisions on the following:
– The amount of money that I have today that I am willing to invest and that I will not be needing for at least the following 5 years.
– From that sum of investable money, how much am I going to actually invest on monthly basis.
– Am I going to be passive investor (investing in ETFs) or an active investor studying individual companies.
– Then my questions would branch out to things like how much would I be investing on one company. How would I be investing in each company.. all quota in or would I be doing cost averaging.
As I said the education and preparation are really exciting.
This article came across my feed at the right time. I am looking to find investments or programs my teenagers can look into, but I don’t know anything about investing. (I have the 401k and an investment my MIL purchased for my husband years ago, but not much else). My question is…how much time does it take you to research the investments you are interested in and how do you determine the value in which you invest? Is it a personal amount or a standard industry practice?
If I am just starting my investment journey I would find it too risky to find answers to those questions right at the beginning. I would first start with preparing my mindset towards investing by reading books that would prepare my mind for the journey. Then decide what kind of investor I want to be (i.e. Passive or Active investor).
I found the best approach is the slow approach because later on I would want to choose the best financial instrument(s) that suit my style and would make me sleep well at night.
Regarding how much to invest, yes it is a personal decision but the most important thing is that the investable money need to be money that you wouldn’t be needing for a long time.
Regarding time for research, it is not really about time as much as it is to have enough information that makes you comfortable to make a decision. For me the ultimate goal of investing is ease of mind regarding the future, but without sacrificing today’s ease of mind. Meaning, not to get myself into situations today that would cause me sleepless nights in order to have a potential futuristic view of ease of mind.
My personal interest is in the stock market and I am learning value investment from a website called Everything Money.
This is so interesting! I appreciate your honesty about your newness to this in your comments. I used to really love stocks and then when Covid was starting, right before the market plunged, I sold everything. I have yet to get back in the game but have been thinking about it. Have you found that the same things trending during Covid, like the tech (zoom, etc.) and health care are still trending or are there other areas that you would recommend in checking out first?
Yes, the COVID time was a scary time, I was not investing then, Many companies surged during COVID after the shock, and when things got back to normal, many of those companies plunged back to their before COVID behavior.
Currently, I am experimenting with small-cap companies within new industries, I am looking at Drones manufacturing, Hydrogen, and AI. Such experimentation with individual stocks in new industries is extremely risky. the wise thing to do with new industries is to invest in a specialized ETF in each of those industries as we don’t know which companies will fail and which will fly.
I found your are article very interesting and informative. I agree that it is so important to do your own research before investing in any stocks.
I find that many people want to invest in something before they fully understand the market or before they have all the facts. Thank you for sharing your knowledge and opinion.
There are two factors of research; the first is getting introduced to the world of investing and getting your mindset ready for the journey, and the second is knowing how to study and research what you intend to invest in.
Thank you very much for your interest
Your idea of educating yourself before stepping into the world of investments resonates with me. Not only the technical and fundamental basis but emotionally as well. I know it is very difficult to contain yourself with a windfall gain or a heavy loss. All resulting in all your investments vanishing in thin air.
The approach you suggested is interesting and carries least risk- even for the first time investors.
I will definitely share your article with friends which would give them added confidence to invest in the stock market without fear.
Cheers!!!
Thanks a lot, Rohit, yes the emotional part and the mindset preparation is of crucial importance. It is through those elements that we are able to discipline ourselves with the strategies that we decide on.
Many fall victims to emotions and an unprepared mindset in chaotic times and they abandon their own strategies on both ends, whether things are going really great, or when things are going really bad.
Thanks a lot for sharing…
The article “What Is the Best Time to Invest in Stocks?” by The Investor Diary provides valuable insights into the timing of stock market investments. It explores different factors that investors should consider when determining the optimal time to invest in stocks.
I found this article to be informative and well-researched, as it covers various perspectives on timing the stock market. you acknowledge that predicting the perfect timing to invest in stocks is challenging, and instead focus on guiding principles and strategies that can increase the likelihood of making successful investments.
“What Is the Best Time to Invest in Stocks?” provides a well-rounded perspective on the timing of stock market investments. It encourages a long-term approach and highlights the benefits of dollar-cost averaging. The article serves as a helpful guide for investors seeking to make informed decisions about their stock market investments.
Thank you very much for your comment. Yes, you are absolutely right. There is no timing the market. Depending on whether you are an active or passive investor, you decide on strategies and style.
It is a fruitless exercise to try to time when the market will bottom or when will it peak.