Are you afraid of buying your stocks when the market is at its highest? If you are a longterm investor, that mostly buy stocks, our perspective at stock buying might inspire you.
The market goes up and down all the time, but in the long run (let’s say 10-20 years) the market has historically always increased. As an investor you will not have the ability to forecast how the market will move tomorrow or in the future (and if you can, stop reading this blog and invest some money instead), which is why you will never have a chance to know whether you buy a stock when the market is at its highest or lowest. Our strategy to overcome this issue is to buy our stocks with a somewhat fixed frequency. At the moment we aim for buying approx. one new stock per month, instead of buying five new stocks in one month and then wait maybe half a year before investing again. By doing so, we do not risk investing in five stocks just before a large drop in the market. By investing in only one stock each month we might have invested once when the market was at its highest but would maybe have gotten the four other ones cheaper. Off course this also goes the other way around, so that you find out you should have bought all five stocks in the same month because it was the cheapest time to buy. But if you want to eliminate some risk, you can do as we do.
Already in 2014 and 2015 many thought that the market was overrated and started waiting for the market to fall. This never happened, and we bet these people now regret not buying stocks for a while. Had they followed our strategy, they would have bought stocks both at the 2014 level, but also at all the different levels that came later and realised great returns up to now where the market is a lot higher.
A lot of people now speculate if the market now is overpriced, and to be fair, no one knows when or if it will turn around. Therefore we keep buying stocks with our somewhat fixed frequency, as we might get some very pricy stocks now and then some cheaper stocks in the future if the prices falls. And if the prices don’t fall, then we will be happy to have bought stocks at the right time.
And as we started out saying – usually stocks increase in price in the long run, so even if we think we bought them at a high price, chances are good that the stocks will increase in the future.
If you want to google more about this strategy it is called “dollar cost averaging”.