The Best Time to Invest in Stocks

Put away your calculators and software programs if you want to get the feel for stock market timing. You'll never beat the other players if you follow the herd.

Above all else realize that all you need to do to win at the stock game is to stay one step ahead of the competition. You can do this only if you concentrate on understanding human nature and human emotions.

If you honestly believe that on a day to day basis that the stock market is rational, you haven't played the game long enough or been paying attention to the reality of the game. If you actually believe that someone can sell you a program that guarantees success in the stock market, it's time to change your thinking and refocus your train of thought.

The best time to invest in stocks is when there is "blood in the streets", and fear dominates investor behavior. The problem is that as an investor you are human as well, and are subject to the same emotions as everyone else.

What do investors do when overcome with fear? They capitulate ... they sell their stocks. This might have sounded academic before September of 2008, but if you were paying attention to the markets between September 2008 and March 2009, you saw investor fear in action.

So, how do you know when the best time to invest is?

If you are a serious stock investor, you were fearful in the above time period as well. I've been playing the game since 1973, and I felt it. Lucky for me, I had little invested in stocks in September 2008. In the months that followed I was waiting for the right time to start buying.

The best time to buy is when you are scared, but you are firmly convinced that the market (most investors) has truly overreacted to a bad situation. When folks are fleeing for the exits in panic ... selling indiscriminately ... it's time to step up to the plate and start to buy.

Don't go all or nothing. Keep some powder dry and invest in steps. You will probably never in your investing life fire one shot and hit the market bottom.

Think back to early 2009. Stocks had been falling for months on bad (horrific) news. Then, in mid-February, selling intensified and stocks started to fall like a rock. This was your invitation to start buying.

If you have always viewed the stock market from afar with nothing invested and nothing to lose, you've never felt the fear that overwhelms many investors in times of market stress.

Take it from someone who has been directly involved in three scary bear markets (1973-1974 ... 2000-2002 ... 2007-2009). Fear of losing your money is real and greatly influences investor behavior.

In times of great uncertainty think with your head and do not make investment decisions out of emotion. The best time to invest in stocks is when the heavy selling is at a climax. Shortly thereafter, all who were fearful enough to sell already have, and rational investors are starting to rush in to buy at bargain prices.

When buying and greed take control, prices go up and those who are still in the game make money. Then it becomes a matter of someday determining the best time to sell, because every market trend comes to an end. 

A retired financial planner, James Leitz has an MBA (finance) and 35 years of investing experience. For 20 years he advised individual investors, working directly with them helping them to reach their financial goals.

Jim is the author of a complete investor guide, Invest Informed, designed for average investors or would-be investors of all levels of financial background and experience. To learn more about investments and investing and his new financial guide go to http://www.investinformed.com

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