When is the ‘Best Time’ to Buy a Stock?
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You will often hear investors, especially beginners, asking, ‘What is the best stock to buy?’ While this is a relevant question, there is another important question to consider: ‘What is the best time to buy a stock?’
The key to locking in profits lies in knowing when to buy a stock. Once you have gauged the correct entry point in a particular stock, you stand a better chance of making money from it.
Mentioned below are some tips to help you identify when to purchase stocks through your trading and demat account. Use these tips to reap maximum benefit from your investment.
When the market is bearish
The best time to purchase a stock through your demat account is when the market is in a bearish phase. This is because many good stocks are available at beaten-down valuations. By purchasing stocks at bargain prices, you have the opportunity to make good gains in the long term, once the market resumes its bull run again.
When a stock hits your buy range
While investing in the stock market, it is good practice to determine the reasonable purchase price of a stock. A strategy could be to purchase a stock only when its price reaches your buying range. This buying range must be determined by you after assessing the company’s performance and studying various stock research reports on it. This will help you to purchase stocks at their reasonable or correct valuations.
When a stock is undervalued
The stock of a company which is undervalued offers a good opportunity for buyers. Before you purchase such a stock, however, it is important to understand its level of overvaluation or undervaluation by estimating its future growth prospects. Stock research reports can help in this regard. You can also find the correct valuation of stocks by using the discounted cash flow technique.
Following technical patterns on charts
You can purchase stocks for the short or long term after examining the technical patterns on the charts. There are many indicators in the technical analysis of a stock that suggest when you should buy a stock and when you should sell it. By learning how to read charts, you will be better equipped to make smart buying decisions in the stock market.
Performance of growth stocks
When a stock reaches new highs and the prospects of the company look good, it is the right time to buy. For instance, when the stock moves beyond its 52-week-high range, you can make quick 5% to 15% returns in the stock. Besides, the strong fundamentals of the stock will make your purchase safe. Many technical indicators show positive signs for a stock when it reaches new highs or approaches its previous high, thus signalling that this is a good time to buy the stock.
Follow these tips and make smart moves in the stock market. For more such insights and the latest stock research reports, get in touch with Kotak Securities to open a demat account in minimum time and with ease.