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When to Buy

The markets are down.  The economy is slowing.  Japan is rocky.  There is a lot of uncertainty in the air.  But the good news is every down market is a superb opportunity to buy ‘em low so you can sell ‘em high.  Are you wondering when should you add to the long-term part of your portfolio?  Maybe you haven’t pondered the maxim “Buy Low, Sell High” for a full afternoon, but let’s think about it a little.   If you buy stocks when they are only medium to high priced and sell them when they are high you only made a little money.   

It’s when you buy stock when they are filthy ugly and sell them when they are high that you make a fortune.  Granted, it is VERY uncomfortable buying stocks when they and everything around them are dark and gloomy.  They say it’s darkest before the dawn.  When the doomsayers are crying the loudest is when you should buy stocks.  When stocks look incredibly cheap and yet no one wants them is when they are a real steal.  When there is panic in the air is when you buy stocks.  When everyone says any little surge in prices is just a bear trap is when you buy stocks.

These markets have provided great opportunities for the short-term trader.  The ride may only last a couple of days, but you can ride them up and short them on the downside.  The big question is how do you time a re-entry back into the markets for your longer-term funds.  For the conservative investor who wants to earn a conservative return, you wait for it to be obvious to everyone that the bottom is behind us and the market has begun to move higher.  For the more astute investor that wants to earn a great return you need to put your long-term money into the market before everyone is getting in.  Get in before everyone else and you let others drive up the price of your shares.  When everyone bar none is buying stocks and feels the need to catch the current upswing, you’d better head for the exits.  Watch for shifts in asset allocation from the major firms.  When these changes hit the media they will get a lot of attention.  Even a recommended five percent change in equities will start ushering buyers into the markets.  When the number of stocks hitting new lows starts declining and the number of new highs increases that is a signal the markets are regaining some strength.  Most companies have warned of lower earnings and weaker sales going forward.  The good news is, if they have been dead honest on their estimates we should see positive earnings growth in the future when compared to the current dismal quarters.  The Fed is working to get interest rates lower and the economy is trying to come back from the Intensive Care Unit.  The stock markets usually catch their breath six months before the economy picks up.  The market is an early indicator of an economic recovery.  By the time things start looking better the parade will have passed you by. 
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