What measures do you use to make sure that you buy low and sell high?

Answer 1

The equations used by stock analysts are very complex and very subjective. They are based on the assumptions that companies are reporting accurate financial statements and that the future can be predicted.

In 2000, 15 of the most prestigious investment advising bodies in the world gave Enron a "buy" or "strong buy" rating. Representitives from almost all of them ended up testifying before Congress 1 year later defending their actions.

Only one analyst, John Olson, gave Enron a "sell" rating for about 10 years consecutive, and Merryl Lynch fired him as a result.

(Doh!)

Here's one equation, in case you'd like to try your hand. It's a bankruptcy prediction model:

"z" score = the sum of the following:

(working capital divided by total assets) x 1.2
(retained earnings divided by total assets) x 1.4
(earnings before income tax divided by total assets) x 3.3
(sales divided by total assets) x .99
(market value of equity divided by total liabilities) x .06

Scores above 3.0 are likely to continue operating
Scores below 1.8 are likely to fail in the near future.

(It might be easier to just let Standard and Poors do the work for you.)

Answer 2

You are talking about timing the market. There is no "sure" in timing the market.

I personally like to find a well known company that maybe has been going through some rough times, but that they are too big to fail. I figure they'll eventually turn it around. I have a small investment account that I use to make these bets. So far I've bet on GM when it was at it's low, Yahoo after it's had some bad news, Lowes too, and a luxury housing builder. All have gone up and made me money. Right now I've got money in Ford and Yahoo again, and both have been doing well the last week or so.

But this is no sure thing. I also bet on United Airlines some time ago, and lost it all when they declared bankruptcy.

If you try this approach, remember to do this with play money. It's money that I've allocated for high risk investments and I'm fully prepared to risk losing much of it chasing this strategy. Also spread it around to 3 or 4 different companies to avoid any one bankruptcy taking you out.

For the great majority of my investments, it's all about asset allocation. Don't worry about the highs and lows, just keep putting it in a wide variety of investments like small, medium and large cap domestic stocks, corporate and government bonds, international stocks, and real estate.. I use mostly index mutual funds for these, and REITs for the real estate part, other than my home.

Answer 3

You should look for stocks that are making 52-week highs with good fundamentals in top 25 industries/sectors. Make sure volumes are high in the first and second week of the 52-week high. With that said, these stocks will go up to higher prices.

To protect yourself, sell the stock that closes below that 52-week high at any point.

So, here is your strategy. These are the basic measures I use in investing, but you got to have experience/knowledge and be very good at technical analysis.

Answer 4

When to sell a stock is probably one of the most tricky investment questions. You sell when you want to lock in profits or when the reasons you bought the stock in the first place no longer exist.

The measures you use are P/E, earnings growth and outlook, debt, book value and your gut. I've missed quite a few good stock runups when I didn't go with my gut instincts. Your first thoughts on the stock after doing your research are usually your best ones. Good Luck.

Answer 5

I buy shares in quality companies that I am sure will do well in the long run, and I hold them for a minimum of 13 months and a maximum of "however long it takes them to double". That way I avoid punitive short-term capital gains taxes, and I avoid losing too much if I get greedy. Once a stock doubles in price, it usually goes down before it goes up again!

Answer 6

Research your company to find out why the price is below expectations before you decide to buy. Choose your selling price before you buy. Avoid capital gains by trading within your Roth IRA. Re-evaluate your sell decision if market performs unexpectedly

Answer 7

Is there was a sure thing we would all be rich off the stock market....
The only kinda sure way is to buy and hold a goo growth mutual fund.....the stock market over just about any 10-20 year period makes money.....there is no sure get rich quick....stay away from late night cable :)