When is a good time to buy or sell shares?

In the middle of October last year, we started to reduce our local equity portfolio when the Straits Times Index (STI) was climbing. In the span of two weeks, our portfolio was cut to half. It was on 9 November when the STI touched a 52-week high of 3,313.61 points and since then the STI had declined to 3,070.60 points yesterday in the face of political uncertainties in the Middle East region. A good friend asked how we time our sale of equity. This same question applies to timing purchase of equity.

Accurately timing the market is not always possible. We sold off some stocks during that Oct/Nov period because some of our stocks had run up into profits and we just wanted to realise these gains instead of leaving them as paper gains (and losing them if the market turns south).

At a personal level, we are cautious by nature. Keeping greed at bay is also an important trait. Being contented with some gains is important instead of waiting for the next new high. It is near impossibility to always time to sell at the highest point or buy at the lowest point.

Investing in equity is driven foremost by macroeconomic environment of countries before looking at specific circumstances of each company. Researches and constant updates of news in these aspects are imperative. Investing on the blind and speculation on tips are not for us. The European sovereign debt crisis became a major concern last year. In addition, we see no end to the unemployment problem faced by the United States in 2010. These are the impetus for our action to reduce our equity portfolio then, besides locking in some gains.

Keeping an interest in the stock market on a daily basis is necessary. The historical movement of STI provides an indication of trending (despite the daily gyration). During this period as the companies are releasing their annual reports, it pays to read the financial performances of companies. There can be no gains without work on our part.

Copyright © 2011, limkimtong for Living Investment

The material presented is intended to be general and written in layman’s language as much as it is possible. The author shall not be liable for any direct or consequential loss arising from any use of material written. Please seek professional advice from your financial advisor or financial institutions on material written covering financial matters.

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