When it comes to investing, no matter the purchase involved, timing is everything. Buying a little too soon or a little too late can mean a difference of thousands of dollars. Prices change with the seasons, among other factors, and a smart investor always does their homework to make sure they get the best deal.
But for the new investor, what makes good timing? Though many will say only experience can say – or that it’s all gut reactions – this isn’t quite the case. No, there are certainly indicators that the market is turning in your favor.
Here are 3 signals the beginning investor should look for when entering any marketplace. They’ll set you in good stead until you develop those instincts of your own.
Homes, Cars, RVs, Oh My
Certain markets follow relatively predictable patterns, peaking at the same time each year, barring a major financial calamity (think the stock market crash in 2008). Typically these reliable markets trade in big, concrete things – homes, RVs, boats, cars, and the like. Learning the rhythms of this trade is fairly easy.
Home sales, for example, are up the last few years as the market is recovering. It took about five years to see 2008-level growth again, with the housing market making a stronger but still feeble showing as of 2013.
Still, if you’re looking to get in on cheap housing properties, winter is the time to do it. Fewer people move during the winter months, making it more of a buyer’s market, but there also tends to be fewer new listings at this time. Winter is also a great time to buy a house, specifically as an investment, because you have time to fix up the property and get it ready to rent in the spring when demand goes up again. You’ll bring in a higher rent if you invest in properties this way.
RVs work on a similar schedule. You’ll get better treatment and a lower price when buying an RV during the winter. Winter buyers are planning ahead, but they’re part of a smaller contingent and dealers are often desperate for sales. Summers, however, are packed with buyers ready to hit the road. Prices get jacked up during the vacation demand spike.
Shiny New Startups
Many senior investors shy away from startups after witnessing the “boom and burst” of the tech bubble in the early 2000s. But now we’re seeing a whole new round of startup companies, and when you get in at the right time, investing can be very lucrative.
First, be aware that seeking public funding for startup companies can mean their business plan is weak and banks refused a loan. In other cases, however, you may be looking at a very young entrepreneur without the credit needed or another promising situation. You need to inspect further.
The best time to invest in a promising startup is typically after they’ve formed an LLC, but before they’ve really opened the door. The LLC designation will protect you if the company goes under – and there’s a good chance it will within the first five years. By taking on an LLC designation, startups protect their investors from becoming subjects of creditors if something goes wrong.
Signs Of The Stocks
Stocks are a remarkably complicated corner of the broad investment world because while you may be able to track large market movements, individual stocks may be acting in a different way. Rather than try to parse all of these relationships, those looking to invest in stocks should determine what they want out of the experience.
There are two main types of investors – growth investors who are interested in stocks with big potential and value investors who look more closely at the assets of the company. But which is the right way to go?
Part of this depends on how much time you’re willing to spend. Growth investors may stick with the same stock for years on end, waiting for it to find that big moment. Value investors, however, might look for moments of quick turnaround in a stock that’s already prominently placed. A broker can help you sort out these complexities.
Investment timing isn’t a single game – it’s a whole world that you’ll need to learn to be successful. Follow close, focus on one type of investment at a time, and commit to learning all you can. That’s the best way to master the signs and catch the right time to buy.