Low prices tell you two things. One is that current owners of assets are in fear or distress or both. The other thing is that you should be considering buying the assets because they are becoming very cheap.
The short-sellers have had all the running so far. The moment will come when they are the ones to be burned, and the longs will collect the bonus cheques. Think five years ahead, not minute by minute.
It is impossible to pick the exact bottom of a market so sensible advisers say it is best to buy spreads, buy the same stock once a month for six months, for example, rather than buying all in one hit.
You buy a stock that has fallen by 80%, for example, but it might fall 95% and wipe out 75% of your stake. By buying six spread out bets, you will get a good average price. Just don’t be upset if your original bet gets decimated. The important thing is to keep buying.
If more people start buying, in the way described above, they will make superb profits over the long term, and help to bring the credit crisis to an end. If private investors don’t get active and start buying the bargains that exist now, governments will move in and close down the freedom of markets killing off the future growth potential of the world’s economy.
Pick companies that are most unlikely to go bust, and buy at least six different ones in equal amounts. If you are unlucky and one of your picks hits the skids, the gains on the five or more others will very likely cover the loss.
This is the best chance most of us will get to buy stocks at any time in our lives. Don’t let the gloomy news coverage persuade you into wasting this amazing opportunity. What’s more the world needs you to act, so no guilt trips are required for seeking profits at others’ expense or something. Go for it!!!