Maybe you’ve recently started looking into investing in stocks, or you’ve been investing for a while, and you’re wondering how to get better prices on your stock purchases. Or maybe you are into trading. Either way, you think that timing plays a role, and you want to know when would be the best time to buy stocks.
When is the best time to buy stocks? The best time to buy stocks depends on if you are looking to invest long-term or to trade. In general, the best time for advanced/experienced traders to buy stocks is in the morning on Monday. For those who want to invest long-term, the best time to buy stocks is during a recession when prices are low. However, you should proceed with caution on what companies’ shares you buy. Additionally, when it comes to long-term investing, you should also be buying stocks now.
You are also going to want to know when the best time to buy is if you are a novice trader (it’s not the same as an advanced trader). Both novice and advanced traders will also want to know when is the best time to invest in large companies versus small companies. There are also general patterns you can follow for the best time of month and year to buy. As for those looking to invest long-term, you may want to know why a recession is the best time to buy. You may also want to know why you should be investing now rather than later. Read on for more details.
When Is The Best Time To Buy Stocks For Trading?
If you plan to trade stocks, the best time to buy depends on if you want to buy shares in a large company or a small company and whether you are a beginning trader or advanced trader. There are also other general rules of thumb that you can consider following if you plan to trade stocks. Keep reading for more information that will help you decide when to buy.
Best Stock Market Hours For Trading A Large Company
If you want to buy shares in a large company, the pre-market session is the best time. The majority of companies release their earnings before the markets open. If a company releases good reports, the stock price can rise rapidly. Large companies have many shares trading before exchanges open, and their prices are less volatile during pre-market. Pre-market runs from 4 AM to 9:30 AM (EST).
Best Stock Market Hours For Trading A Small Company
If you want to buy shares of a smaller company, right when the market opens is the best time to do it. Buying between 9:30 to 10:30 AM (EST) is best. During this timeframe, traders have access to more shares, and all of the exchanges are quoting prices. Market volumes and prices during this time are more erratic. This is because, during the morning, the market factors in all news releases and events since the prior closing bell.
Additionally, if you plan to sell at the end of the day, the morning would be the best time for you to buy-in.
Beginning vs. Advanced Trader
For those who are more skilled at trading and can recognize the appropriate patterns, you will get the most out of your trades by buying stocks in the morning, as a general rule of thumb. That way, you can take advantage of the price volatility to make a fast profit.
However, if you are new to trading, buying stocks in the morning could result in significant losses, so you may want to hold off on trading during the volatile morning hours. For beginners, buying shares in the afternoon is best. The majority of companies will not be releasing earnings, while stocks are trading in the afternoon. They do this either during pre-market or after the market closes to minimize irrational trading decisions. By the middle of the day, most stock prices reflect all relevant news and information. Thus, the middle of the day is typically the calmest, most stable part of a trading day.
As a novice trader, you’ll want to take advantage of the relatively stable prices during this timeframe. That way, your returns will be slightly more predictable.
Trading In General
In general, whether you choose to trade pre-market, in the morning, or during the afternoon, the best day of the week to do any trading, in general, is Monday. This is because of the “Monday Effect.” This theory says that Monday will follow the trend of the previous Friday. So if the market was down on Friday, in theory, you could expect that prices will further decrease on Monday.
Additionally, stock prices have tended to drop on Mondays for decades now, and some attribute this to the tendency that companies have to release bad news after markets close on Friday. Come Monday; you end up finding stock prices reflecting Friday’s bad news. Others believe that it could be the increased pessimism amongst traders over the weekend.
Whatever the reason, the “Monday Effect” is now more well-known amongst investors than it was in the past, so it’s impact has mostly diminished. While prices might drop on Monday, the effect is small, but it’s still worth looking into buying on a Monday to see if you can take advantage of any bargains.
Besides knowing the best day of the week, you may also want to know the best time of the month and the best time of the year to invest.
As for the best time of the month, you should invest in the middle of the month. During this time, security prices tend to be lower. Usually, towards the end of the month, the cash flow from fund managers causes stock prices to go up. You’ll want to buy stocks from the 10th to the 15th of the month. Then, you can sell your shares at the end of the month. You can capitalize on monthly price movements and gain an excellent return by doing this. However, this is simply a general rule of thumb, and may not be applicable every time.
Concerning the best time of the year to buy, there is a general seasonal pattern you can follow. Typically, you see an upward trend from January to May, and sometimes through the summer. However, many traders know about the concept of selling in May because markets have historically provided better returns at the end of the first half of the year.
September is when you’ll usually see the market go down slightly. During this time, when prices are slightly lower, you may want to consider buying. Once October comes around, the market may start going up again, and this typically lasts until December. At this time, investors may choose to sell for tax benefits. Therefore, you may see drops in prices during that time as well.
These seasonal effects are not the same as cyclical ones. Cyclical effects can occur at multiple times during a year or once every few years.
When Is The Best Time To Buy Stocks For Long-Term Investing?
When it comes to long-term investing, there is no perfect time. You should have started yesterday, but your next best option is to start now. Even if prices drop in the next few days, that doesn’t mean prices will be the same years from now.
However, if you want a general idea of the best time to invest on any given day, you’re better off investing midday when stock prices aren’t so volatile.
Another time in which you can get bargain stock prices is during a recession. As Warren Buffet says, “Most people get interested in stocks when everyone else is. The time to get interested is when no one else is. You can’t buy what is popular and do well.”
You must be cautious, though, because you don’t want to buy a company that could go bankrupt. Instead, you want to invest in companies that can weather the storm. During a recession, stock prices of big-name companies that have historically done well for decades will drop. There will even be companies who have historically done well during trying economic times whose stock prices will fall. Because these stocks prices are usually a lot higher, this is an opportunity for a savvy investor to buy stocks at discounted prices.
Make sure to always research the company that you are investing in, though. As a general rule of thumb, you want to buy companies with a dominant business franchise and a strong history of profitability. For more information on the best investment strategies during a recession, click here.
No matter when you choose to buy a stock, it is important to note that the S&P 500 has increased by over 177% over the last 20 years. That means that the S&P 500 rose that much despite the market experiencing the Great Recession of 2008. The likelihood is that it will continue to increase over the next 20 years as well.
Additionally, if you look at this chart that shows Amazon’s stock price growth over the past ten years, you will see that, even now, when unemployment is high, Amazon’s stock price is at an all-time high.
The bottom line is this: when it comes to long-term investing, the price you buy at isn’t as important as picking a good company with long-term potential and waiting.
There is no way for you to know if the stock price you are looking to buy has hit its bottom. You don’t need to predict that anyway. You want to invest in good companies sooner than later. Otherwise, you’ll either end up not buying in at all, or buying at a later time when prices are even higher.
Even if you might not exactly know what will happen to a stock price in a few days or weeks from now, it doesn’t matter. You can reduce your risk by diversifying your portfolio. And as stated earlier, that doesn’t guarantee what will happen to the stock price years from now. That is why it is essential to research the companies you want to invest in and invest in those you believe will be around for a long time.
Even Amazon’s stock price dropped substantially in March. The best time to buy Amazon would have been ten years ago, but if you couldn’t do that, you could have bought it when it dropped. Even then, some would avoid buying. That’s because they see the market dropping and make their decisions based on what is currently happening to the price and not based on what is likely to occur in the future.
Well, now, Amazon’s stock price is better than it was at the beginning of the year before unemployment rates increased. And it’s only been a few months since its substantial price drop in March.
When it comes to a company that you know has the potential for an increase in the stock price over the long-run, the best time to invest is now!
After you’ve picked a quality company that you believe in, all you have to do is hold. Another great saying from Warren Buffet is: “If you aren’t willing to own a stock for ten years, don’t even think about owning it for ten minutes.” As long as you plan to keep your stock for ten years, there is no perfect time to buy. Instead, there are excellent companies that will provide you a hefty return in the long-run if you decide to invest in them now.
Wrapping Up: Best Time To Buy Stocks
While there are general rules of thumbs for when the best time to invest is, it depends on whether you are trading or long-term investing. For those who are trading, there are certain times of the day you should buy based on if you are buying a large company or a small company and whether you are an advanced trader or a novice. Additionally, there are some general rules of thumbs that all traders can follow for the best times to buy during the week, month, and year.
As with all investing, though, buying at any specific time does not guarantee you will get a positive return. In reality, there is little stability in most market timing patterns.
As for those who prefer long-term investments, you can take advantage of bargain buys during recessions. But ultimately, you don’t need to wait for an economic downturn to invest. You just need to research companies you believe in and invest in great ones that have long-term growth potential. If you find a diamond in the rough (or a diamond), you should be buying sooner rather than later. Then, hold your investments. Now, start buying some stocks!