When to BUY and When to SELL?

We have talked about type of suitable investment plan as well as where to invest but the most important question still stays i.e. when to buy and when to sell? Probably the most debatable topic in financial markets. Mostly, the information I have shared could be gathered from anywhere else too, but it all comes to this point of entry and exit from the investment. Many traders & investors seek advice of technical analysts whilst others depend on brokers.

I can introduce you to two solutions for buying & selling.

A very simple fundamental is to buy when everyone is selling and sell when everyone is buying. That way, you will enjoy the advantage of buying at the bottom and selling at the top. But, this is a pretty layman statement. For being a smart investor our investment should have clear entry and exit positions. We will talk about it in a while, but first let’s root for this simple solution & clear the air. If you are planning for a long-term investment (30 to 50 years’ investment plan) recommendation is to buy at the current bid price. Here objective is to enter the investment as early as possible because it doesn’t matter buying at a premium price when the period is targeted for longer run. Hence, after choosing the fund (ETF) or security of your confidence, invest money with no delay and also try to capitalize systematically, if possible. Consult, with your preferred bank for ETF investment they offer and also ask, if it is beneficial for you to have a systematic investment plan (SIP).

So far forth, we have discussed about the longer span of investment and how it should be executed for best outcomes. But for people requiring funds on urgent basis, waiting for years might not pay well. So, what about a little shorter investment plan? Is Investment not rewarding for shorter spans? Well, it is very much rewarding for any duration, it’s just the matter of strategic investment. For short-term plan Investment requires devising some kind of strategy & a bit of market monitoring. Don’t worry, I will not tell you to make your own strategy. It is a part of the second solution we are going to discuss.

The simplest kind of strategy for investment signals (buy/sell) is keeping track of IPOs. IPO stands for Initial Public Offering

Note: An initial public offering (IPO) is the first time that the stock of a private company is offered to the public. IPOs are often issued by smaller, younger companies seeking capital to expand, but they can also be done by large privately owned companies looking to become publicly traded. -investopedia.com

Look at market fluctuations as your friend rather than your enemy; profit form folly rather than participate in it.

-Warren E Buffett.

Whenever in history an IPO came for expanding its capital, within the next couple of years the market has fallen dramatically. What does it strike you with? Do you get the point here? An IPO mostly signals the upcoming downfall in the market (with a technical reason behind it), hence its offering indicates shorting (sell) your position. After that wait for a year or two and buy if you think you have made satisfactory profit for the round. But, don’t just square off your position, if you want to capitalize your return, book profit & long your position at this instant. So that when the market rises up again for another IPO or its own recovery, you could sell at the top. Let us understand this with a practical example;

https://in.investing.com/indices/s-p-cnx-nifty-chart here is the chart of Nifty 50. If you search for largest IPOs in indian market for the last decade you will notice that Reliance Power & Coal India Ltd. introduced their IPOs in Jan, 2008 & October, 2010 respectively. If you closely look at the chart you will find that during these months’ nifty had been on a record high. And suddenly, within a year market collapsed for some reasons. In such scenarios making profit is not a big deal. This is yet another way to make timely profit, but it needs careful market tracking & keeping eye on forthcoming IPOs, to enter and exit at the correct positions.

"Where a long term investor ignores these fluctuations, a short-term investor could gain a higher return from it."