Question: Almost all my friends are not interested in the stock market as prices keep on falling almost every day. The share prices look cheap but most analysts expect further falls. What should I do?
Technically, you need to examine the extent and the depth of the fall of the stock market since its last peak.
If it had been falling over a few months already and the share prices are very much off their peak levels, then you should embark on bargain hunting.
Look for fundamentally sound shares of companies with a solid balance sheet and good earning prospect. Upon examining these factors and if the share price is at bargain levels, then you should buy the said shares but bear in mind only to buy downwards. (My comment: be careful, better to average upwards).
Given time, the price of your shares will appreciate and you will be able to reap your profits.
From peak to present share price:
1. How much has the price fallen from the peak?
2. Is the PE low enough?
3. Buy if you feel comfortable about the share price.
Ref: Making Mistakes in the Stock Market
Keep INVESTING Simple and Safe (KISS) ****Investment Philosophy, Strategy and various Valuation Methods**** The same forces that bring risk into investing in the stock market also make possible the large gains many investors enjoy. It’s true that the fluctuations in the market make for losses as well as gains but if you have a proven strategy and stick with it over the long term you will be a winner!****Warren Buffett: Rule No. 1 - Never lose money. Rule No. 2 - Never forget Rule No. 1.
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