So the next question is, is this the right time to enter the stock market?

Well, it depends on what kind of stocks you are looking at. If you are planning to invest in a good company with good management (and good cash flow. Don’t just look at the profit), then I don’t see any problem. Buy it when the price is right…..not the lowest and not the highest. Then keep it for few years.

On the other hand, if you are a speculator and want to invest in those stocks with fluctuating price, you better be careful. Don’t forget what happened during the stock market crash especially the one in 1997-1999 period. Stocks which were priced at $20 could disappear within a weak. That is 20k worth of money burnt in 1 week.

These stocks are what I always call empty vessels. Companies which have no proper cash flow, limited assets and yet have a ridiculously high price tag.

My advice, never to invest in such stocks. Yes, you might be able to earn a lot by trading them within a short period of time due to their fluctuating prices but chances are, you will get yourself in big big trouble most of the time. Because the stock price does not reflect the true value of the company.

Remember that investing in stock market is not gambling. And if it’s not gambling, why do you want to put your money into a company which is practically an empty vessel? And if you are not investing in empty vessels, there’s no need for you to panic even if the stock market crashes.

p/s…. over the years, there have been a number of companies which are regarded as empty vessels. If you have been in the stock market for long, you should be able to see. I won’t give any examples here though.

p/s…. empty vessels are not necessarily petty stocks. Some petty stocks actually have pretty good records, with proper management.

It’s just like shopping, except for the value of the things you’re shopping for. You walk around the mall (looking at the stock market chart), and your fingers start to become itchy and something in your mind is telling you to BUY BUY BUY. And you’ll most probably reply by saying “No, market is bad. Let’s wait it out” to which the devil inside you will say “Oh, it’s cheap now, don’t you think so? Buy now and it’ll go up tomorrow!”

And you succumb to the devil’s will. You bought 1000 units of company A. The next day, it dropped 20%, due to the overall market condition.

It’s not like you didn’t do your research well enough. You did. The problem here is that, your research might be telling you that the price might drop tomorrow, but there’s another part of you which is telling you to follow your gut feel and go buy. And in terms of stock investing, research data + gut feel = the right purchase. Gut feel alone might bring you a lot of unwanted losses. A properly analyzed data is always better than your unsupported gut feel.

I’m still learning how to analyze the data properly. But from my experience, I know that following gut feel is not a good thing to do. And most often than not, in such lousy economy, it does pay to be patient when it comes to stock investing.

Patient as in to hold when your shares are dropping a lot in price (provided the companies you’ve invested in have very good fundamentals and the profit forecasts are good too). And patient not to jump in with the rest of the bandwagon to buy the shares which ‘seem’ to be cheap and attractive.

Conclusion, be patient, practice the famous ‘wait and see’ attitude, analyze the situation and only jump in when you are 100% sure.

Just my opinion. Again, I’ve learned this the hard way.

I used to guess a lot during the early stages of my stock investment journey. It was a mixed result. I’ve earned a lot in the first few months and I thought to myself “Maybe I really have a knack on this” but I was wrong……very wrong. I ended up losing even more than I’ve earned. Until today, I am still trying to recover the amount I’ve lost due to my wrong prediction.

To guess is to assume to be true without conclusive evidence. And to do that, it’s like gambling.

The market movement is way outside our control. Everyday, certain issues might just happen somewhere, maybe in Timbaktu, and the world market might not be ready for that incident. As a result, the market will go down. But there are also times that certain issues might not have as big an impact as most people have predicted. Thus, the market might not go down at all. So taking a guess on what kind of issues might happen tomorrow does not sound like a very smart move.

What about the behavior of the population (as in the behavior of majority of the stock investors)? You cannot predict what they’re going to do in the next few minutes. You might guess that the stock market is going to be good since the fundamentals are right…but maybe there’s this one smart guy who told everyone this one bad news……..and everyone started to panic sell. Do you think you can foresee such things as well?

I doubt.

So stop guessing. Do your proper research, your market analysis and buy accordingly. Making decisions after you’ve done some proper researches is not considered as guessing.

Remember that the stock market movement is like a toss of a coin – it can go either way and you can never predict which way it’s going. Even if you can, you can’t do it correctly all the time.

Just my opinion. I’ve learnt this the hard way.