Look who’s coming back! Investors are buying stocks

The private investor

If anyone can get his timing all wrong, it’s the private investor. These guys hang around the fringes of a bull run, biting their nails and wondering if it will last, and then get the nerve to make a move after the real profits have been bagged.

Timing

True to form, they get their timing wrong on the way out as well, selling when markets are nearing bottom, and consolidating their paper losses. As soon as the market recovers and starts moving up, they start buying. It is called the herd mentality, and is usually best seen as a lambs to the slaughter show.

Private investors are tip-toeing back into the stock market.

As the exchanges sink ever lower, private investors are defying the gloom and returning to the stock market. They are either bored at being out of the action or are boldly taking advantage of low prices to top up their holdings. Some may already be regretting their decision, but whatever happens, they are buying good shares at much more attractive prices than 12 or 18 months ago.

This also suggests that the message is finally out: the best time to invest is when shares are cheap, not when they’re expensive.

Construction time again

Research shows that private investors are buying back into industrial stocks, particularly infrastructure and construction-related companies. Construction share prices are 50 percent down from September 2007, and buyers are hunting for bargains. It also shows that investors are looking to the future, rather than living in the past. Financial stocks are a no-no at the moment.

There is a danger that private investors have moved too quickly on the stock market revival. There is still no real direction and it’s not clear what’s happening.

Forget the herd

The herd mentality asserts itself at moments like these and the slow walk can turn into a stampede, crushing optimism underfoot. Then when everybody has lost hope, the recovery begins and fortunes are made. Remember that the herd mentality is difficult to break. Most private investors will never break away from the pack.

But wait-where’s the bottom of the market?

No one can forecast where or when the bottom of the market is, but investing small amounts during these dark days may just pay off handsomely when the sun rises on the global economy again. It’s always darkest before the dawn.

Going against the herd at a time like this needs nerves of steel, but investing little and often should make the return to equities a lot less daunting and be hopefully rewarding in the long run.

The markets are low, lower and lowest

I keep looking at the share prices and literally salivate over some of the bargains to be had. I have never seen prices as low as these. I see unprecedented opportunities to buy shares in individual companies with excellent prospects. That isn’t to say that their share prices won’t fall further, but patient investors dripping money into such companies will be handsomely rewarded over the years to come. For anyone with spare cash lying around this must be worth a try.

However, if you have to take a Payday Loan to raise the money, it’s probably not the best idea.