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Time for bargain hunting, or should I wait for falling knives to hit the gound? January 22, 2008

Posted by deminvest in Defensive Stock, investment, investment strategies, My investing mistakes, risky investments, stock faq.

Nobody really knows.

Buying stocks when they are falling like this is a bit like catching falling knives. I’m probably going to get hurt. It is more healthful to wait for knives to hit the ground to easily pick them up. Maybe I should wait until current sell off finishes to pick up stocks at lower prices, rather than buying now and maybe seeing stocks continuing to fall tomorrow.

Buying stocks now is like catching falling knives

Of course if today was the bottom (the ground) I’d see a rebound tomorrow and higher prices.

Unfortunately there is one day every year in which the market is at its minimum and many days in which market is on its way down, so I shouldn’t bet on the fact that I’m buying on a minimum.

I can be pretty sure to buy during the month in which stock-markets hit the minimum, because I do buy  every month. I guess I’ll have to wait until February the first for my “bargain” buy. Meanwhile I better search the ruins of Wall street to find a cheap gem.


1. Kevin - January 22, 2008

I keep to buying once at the beginning of the month like you do, but only stray if stocks on my watch-list drop at a certain amount. I will just keep buying as I ever had and average down on the lower price.

The problem with waiting for the knife to finally hit the floor is that it is always hard to convince yourself that it finally hit bottom. If you get into the gloom and doom of the market you start to think that this current rise is only an aberration and that it will fall again tomorrow.

2. deminvest - January 23, 2008

You’re absolutely right Kevin. It is very hard to spot the real bottom, specially for me, since I have no clue about technical analysis.
I think the idea for technical analysts should be that they get back into the market when they see a new upward trend for some days or weeks. That way they buy a little higher than the bottom, but it is likely that the stock won’t continue its free-fall.

3. Albert - January 27, 2008

I am not that worried about the markets now. Most of the bad news are out now. I think that we are in some kind of flat correction.
Although in real terms the stock market may not get higher (because the value of the dollar keeps going lower) I would expect a new wave of manic buying during 2008 and 2009. It is a bubble economy, after all.

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