Learn How to Value the Stock Market
Remember that price matters most and Market timing is terrible, unless you time is right.
Anyone who tells you that it’s always sensible to buy stocks is dotty. No one said this during slack period of 2000 -2001, which was wonderful time to buy stocks. Also during the recent slack, when Dow hit the low of 6600 and sensex hit the low of 8700 in Jan. 2010, everybody was exiting the stock market or ignoring it. If you buy stocks during that period, more than 80% can be made within 8 months.
Remember, it can take you ‘real long time’ (may be 5 to 20 years) to get your money back even from a badly timed purchase of an indexed fund. In a competitive economy, everything from pin to computer sells for what it costs to produce. The same is true for companies, though their prices can be above or below the cost for several years.
This is the problem. Sensible investor can have a bad time at bubble for several years. They will get out of the market too soon in the bubble years and isolate them from the un-natural bubble creamy profit. There is no answer to this. If there were, the stock market would never get over-priced. Sensible investors can’t be greedy or boast at parties.
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