No analyst or economist can predict market movements with complete accuracy over the coming months or years. So, is there truly a best time to buy and sell shares, or does attempting to time the market simply add unnecessary risk?
A recent study by Architas, part of the Axa group, found that investing in the FTSE All Share between November 1 and April 30 over the past 22 years would have yielded a 167% return. This trend isn’t unique to the UK; major stock markets worldwide have also delivered strong returns during this period.
Short and long term investment
At the end of 2018, Ibex 35 shares were cheaper than at the start of the year, making it an attractive opportunity to buy BBVA shares for many investors. However, short-term investors often miss these chances, highlighting the need for caution when buying and selling shares.
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Several factors demand careful attention before investing:
- High market volatility creating uncertainty
- Low growth expectations
- Potential economic slowdown
- European Central Bank (ECB) rate hikes
While this environment may challenge short-term traders, it offers long-term investors—those holding for months or years—a chance to buy shares well below average prices and potentially earn strong future returns.
Ultimately, the best time to buy depends on your investment horizon. Long-term investing resembles saving, whereas short-term trading requires daily focus to profit from market fluctuations.
Successful decisions also rely on two key tools: technical analysis and fundamental analysis.
Technical analysis and fundamental analysis to buy and sell shares
Many investors buy stocks when prices are rising and sell when prices drop—often the opposite of a smart strategy. But how can you tell if a stock is truly cheap or expensive?
The answer lies in combining technical and fundamental analysis to identify the best times to buy and sell.
Technical analysis focuses on short-term investments, helping traders decide when to enter or exit the market over hours, days, or weeks. In contrast, fundamental analysis supports long-term investing, guiding decisions on what stocks to buy or sell over several months or years.
The fundamental analysis
Fundamental analysis aims to determine a stock’s true value by comparing financial data from company balance sheets with its current market price. This helps identify if a stock is undervalued at a given time.
By evaluating the company’s financial health, key ratios, and market environment, investors can better assess financial risks. This approach provides a solid foundation for deciding when to buy or sell shares based on a company’s overall strength.
The technical analysis
Technical analysis focuses on studying market behavior—such as stock prices, trading volume, and open interest—to predict future price trends, without assessing financial risk.
This method complements fundamental analysis by offering valuable insights on when to buy or sell based on market trends and movements.
Together, both analyses equip investors with critical information to make informed decisions. Success depends on accurately identifying and forecasting market trends to optimize buy and sell timing.
Frequently Asked Questions
When is the best time of year to buy shares?
Historically, buying shares between November and April has shown strong returns in many markets. However, the best time varies depending on market conditions and individual investment goals.
How do I know when to sell my shares?
Selling should be based on your investment strategy—such as reaching your target price, changes in company fundamentals, or shifts in market trends identified through technical and fundamental analysis.
Can timing the market improve my investment returns?
Timing the market is challenging and risky. Long-term investing often outperforms attempts to predict short-term price movements. Combining technical and fundamental analysis can improve decision-making.
What’s the difference between technical and fundamental analysis in buying and selling shares?
Technical analysis examines price trends and trading volume to predict short-term market movements, while fundamental analysis evaluates a company’s financial health to guide long-term investment decisions.
Should I buy shares when the market is falling or rising?
Buying during market dips can offer opportunities to purchase undervalued shares. However, it’s essential to assess company fundamentals and market trends before making decisions.
How do economic factors affect the best time to buy and sell shares?
Economic indicators such as interest rates, inflation, and GDP growth impact market conditions. Monitoring these helps investors decide optimal entry and exit points.
Conclusion
Determining the best time to buy and sell shares depends largely on your investment goals and market conditions. Long-term investors benefit from focusing on a company’s fundamentals, while short-term traders rely on technical analysis to time their moves. Both approaches offer valuable insights, but success requires careful research, discipline, and understanding of market trends. Ultimately, combining these strategies helps minimize risk and maximize returns in the ever-changing stock market.