Catching Falling Knives? Smart Strategies for Buying Stocks in a Downturn.
As stock prices decline, you may feel as if you're at the world's biggest sale. Suddenly, stocks that seemed expensive weeks ago are trading at bargain valuations. You may be tempted to jump in and catch that falling knife, hoping you're buying at the best price. Of course, it's nearly impossible to time the market, so you're unlikely to buy a stock at its lowest and sell at its highest.If you're a short-term investor, this could be a problem. In this case, it's risky to buy a stock as it's dropping because it may take a while for it to recover and go on to gain. Meanwhile, if you aim to sell in a few days or weeks, you may have caught the knife by the blade and find yourself recording a loss.However, if you're a long-term investor, the picture looks much different. You can buy stocks during a downturn because, by holding on for five years or more, you're giving those companies time to recover and grow and the share price an opportunity to reflect that progress. Now, let's check out some smart strategies for buying stocks during a downturn.Continue reading
As stock prices decline, you may feel as if you're at the world's biggest sale. Suddenly, stocks that seemed expensive weeks ago are trading at bargain valuations. You may be tempted to jump in and catch that falling knife, hoping you're buying at the best price. Of course, it's nearly impossible to time the market, so you're unlikely to buy a stock at its lowest and sell at its highest.
If you're a short-term investor, this could be a problem. In this case, it's risky to buy a stock as it's dropping because it may take a while for it to recover and go on to gain. Meanwhile, if you aim to sell in a few days or weeks, you may have caught the knife by the blade and find yourself recording a loss.
However, if you're a long-term investor, the picture looks much different. You can buy stocks during a downturn because, by holding on for five years or more, you're giving those companies time to recover and grow and the share price an opportunity to reflect that progress. Now, let's check out some smart strategies for buying stocks during a downturn.
