Investing in stocks can be a daunting task, especially when it comes to determining the right time to enter the market. Many investors worry about buying stocks that have already made significant gains, fearing that they may have missed out on the opportunity for substantial profits. However, it’s essential to understand that it’s never too late to buy into a stock that is on a long-term trending trend.
Case A – Eli Lilly
One company that exemplifies this concept is Eli Lilly, a pharmaceutical giant that has seen substantial growth in its stock price since the COVID-19 pandemic from $125 to $616 today (18 Oct 2023). Back in May 2023, the stock made its entry to the US Top 10 (educational strategy) at around $429 clocking a solid 43.5% gains in just about 5 months time.
While it may be tempting to shy away from a stock that has already experienced significant gains, it’s crucial to remain dispassionate and focus on the potential for future growth. Instead of asking yourself, “Why should I buy it here when it has already gone up three or four times?”
consider the possibility that it could continue to rise even further. If the stock goes up 20 times, missing out on its current gains may result in losing a significant portion of potential profits.
Case A – NVDA
Another example of a stock that has experienced a positive long-term trend is Nvidia Corporation. Since October 2022, when the stock was priced at $100, it has steadily climbed in value. Our strategy had picked this stock up near $240, and the stock reached a high of $500 before settling at $460.
This impressive performance translates to approximately 90% gains on Nvidia Corp. Although there are signs of a potential head and shoulders pattern, if the stock starts to decline, our strategy ensures that we exit at the appropriate time.
When implementing a structured investment strategy, it’s important to have a plan in place for both entering and exiting stock positions. Having a well-defined strategy helps eliminate the fear of missing out on gains or the uncertainty of how to react if a stock suddenly starts to fall. By adhering to a predetermined plan, investors can proceed with confidence and remain committed to their long-term goals.
One common concern for investors is the fear of being too late to invest in a trending stock. However, this mindset is not only unnecessary but can also be counterproductive to investment success. Trends in the stock market can persist for extended periods, and there is often ample opportunity to capitalise on a company’s growth even after it has experienced significant gains.
Rather than focusing on the bottom of a market cycle, it’s more crucial to identify stocks with promising long-term potential. Attempting to time the market perfectly is a difficult task and can often lead to missed opportunities
Additionally, investors should remain aware of the risk associated with trend-following strategies. While investing in trending stocks can be lucrative, it can also be volatile. It’s crucial to conduct thorough research and analysis before committing capital to any investment. Diversification is another essential aspect of risk management. By spreading investments across various sectors and asset classes, investors can mitigate potential losses and maximise their chances of success.
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