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When is the best time to buy and sell shares?

The two most important decisions an investor faces relate to when to buy or sell securities. The truth is that this question has no one correct answer, there are quite several factors to consider.

In the words by one of the investment greats, Lou Simpson, “In many ways, the stock market is like the weather in that if you don’t like the current conditions all you have to do is wait a while.”

The best time to buy is when others are pessimistic and prices are low.

The best time to sell is when others are actively optimistic and prices are high. When buying, remember that the prospect of a high return is greater if you buy after its price has fallen rather than after it has risen. It’s best to adopt a buy or sell discipline and adhere to it.

Caution should be exercised. For example, after the share of a company declines by 30%, 40% or more, the first question to ask is why. Why did the stock fall as it did? Did other stocks in the same industry experience a decline? If so, was it as severe? Did the entire stock market fall? If the broader market or other stocks in the same sector performed relatively well, there may be a problem specific to this company.

Several typical warning signs can tip off an investor about changes that could mean the price may go down.

For instance, when fundamentals start to fail. If the company’s fundamentals, such as sales, debt, and cash flow begin to show signs of stress, it might mean something has changed that will negatively affect the stock’s price. Don’t wait for the market to panic over a decline in revenue or another key fundamental, rather be prepared to unload the share while you still have a healthy profit.

Many investors set a floor on the stock’s price so that if it falls below a certain level, they sell. You can also set an upper limit that triggers your sale.

Your rationale here might be that you fear the stock will have a difficult time supporting a market price above a certain level and any hint of bad news will send the price into a nosedive. This mindset can allow investors to make non-emotional stock-trading decisions that could reward them with higher profits over time.

When companies start cutting or eliminating dividends, it is time for investors to pay close attention to that share, to do a thorough fundamental and technical analysis that will help them to make a smart decision. Other strategies for selling include the thoughtful consideration of events that are moving against your share and causing a need to act.

If a share you own becomes the focus of media attention and receives a lot of buzz, it may be time to look at taking a profit. These types of stock-feeding frenzies attract inexperienced investors who bid up prices only to have the market collapse when the hype dies. If you’re not careful, once the frenzy dies down, you can watch the price fall down quickly, right past your profit.

Certain market conditions like bull markets require investors to take quick action. This is made simple by the C-TRADE platform which enables any Zimbabwean in and out of the country to buy shares anytime anywhere without visiting a stockbroker. C-TRADE has eased the way investors do business on the capital market. Investors do not need to physically visit their respective stockbrokers. Investors only have a virtual interaction through the online and mobile trading platforms.

C- TRADE has introduced investor interface tools such as a Web Portal which is only accessible to retail investors. The Web Portal offers an advanced interface which allows investors to participate on the exchange in real-time through personal computers and gives them rich stock market information.

There is also an app-based solution for retail investors on smart phones. The USSD-based solution is targeted at non-smart phone users and integrates mobile money services. 

To find out more about C-TRADE visit www.ctrade.co.zw.

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