Are stocks still trading at attractive prices?

April 26th, 2010

Is this the time to start buying seriously?
It seems I’m always asking questions like this. When the stocks were at their lowest point, I asked, “Is this a good time to buy?” I suppose I thought they would all go down to $1. Then when they bottomed out and started rising, I asked, “Is this a good time to buy? Perhaps this is just a fluctuation and they will go down again?” Now that the stocks are back to expensive I’m still asking the question – “Is this a good time to buy? Perhaps they are overpriced and won’t go higher?” Of course, no one has the answer to my question. And that leaves me hanging, again.

The answer
There are probably many answers to the question. If you are a serious investor, the hours you spend on your investing homework will tell you if a stock is reasonably priced, sky high, or very low. If you a gambler, you should have a short list of speculative stocks and you probably know all they critical figures by heart. If you are, like me, a “Sunday afternoon” stock market player, whatever you decide will be wrong.

The stock exchange is a mug’s game
Some of the world’s most successful traders and great fans of stock markets admit that the stock exchange is volatile and risky. They have faith in long term investment, but then stocks have to compensate investors for the risk they’re taking and they have to outperform other investment avenues, such as government bonds. Investment managers keep saying if you hang in there, stocks will win.

How about selling stocks?
I have a few stocks and I’ve had them so long they’ve developed sentimental value. I hung onto them through the recession and I was right – they are all up on the prices I paid. If I sell now I will make some money – not enough for a new car, but enough for a short holiday in Europe, say. Nah, think I’ll wait until they reach a car.

The main problem
As far as I can make out, my problem with the market is my lack of market education. I don’t really understand the stock exchange and how it works and why it behaves as it does. My knowledge was gleaned from guys in the office, my parents – who hated it passionately – and odd newspaper articles that I manage to read to the end. But I have no formal market education.

Gambling
I guess I like the gambling aspect. I may not be able to hit a $2 or $3 million jackpot on the progressive slot machines, but then I am also not at risk for huge amounts of money. A stock I buy for $2 or $3 may go up to $10 and I make myself a few hundred dollars, but if the company crashed I would lose only a couple of hundred dollars. This kind of gambling appeals to me.

This entry was posted on Monday, April 26th, 2010 at 12:22 pm and is filed under Economy, Finance. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.

Leave a Reply

Click here to cancel reply.

Name (required)

Mail (will not be published) (required)

Website