Posted on September 12, 2009 by Nayab Naseer

One basic rule while investing in the stock exchange is that it is better to buy the wrong stock at the right time rather than the right stock at the wrong time. A share prices keep on fluctuating. In the long run the share values would reflect the business fundamentals. However, in the short run the prices could go up or down depending on a host of factors like market sentiment and rumors that need to necessarily be connected to the business performance of the company.

A weak or poorly performing company might see a temporary surge in prices before it gradually starts its decline. Similarly a good blue chip stock might have surged to beyond reasonable levels, and would gradually decline to more realistic levels. Buying the blue chip stock at its peak would be a bad investment move, for it would take several years before the investor can hope to make profit from the investment. On the other hand, buying the poor company’s stock at the right time and selling it at the decline would give better return, even though the investment would be a risky option.

The bottom line is to make informed decisions and not be blindly swayed by the name and reputation of the stock.