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How to invest when the stock market is nearing new highs

by , 01 April 2015

From the middle of January, stocks on the JSE took a fresh drive higher. This saw the market hitting new all-time highs.

So when the market has been performing well, how do you know if you should buy now? What if the market crashes?

Here's what you should do…

Five things to consider when investing in a bull market

#1: Overcome your fear of investing
It’s easy to come up with a number of reasons not to invest.

The hard thing is actually overcoming your fears and putting your money to work on the market.

#2: You need to invest defensively
Before investing any money into the stock market, you need to decide how much you’re willing to lose. It’s easy only to think about what you could make.

You can structure your stop losses and trailing stop losses around this. For example, if you’re investing R50,000 and you don’t want to lose more than R5,000, you need to stick to a strict 10% stop loss with all your investments.

#3: Weigh up how much you’re getting for your money
Even if stocks have edged up again and are teetering on new highs, think about what you’re getting for your money, Dr Steve Sjuggerud in The Crux explains.

With interest rates low, keeping your money in the bank isn’t paying you much. Investing on the stock market is probably presenting you with better value in comparison to other investment options.

#4: Look to invest out of South Africa
You might find better opportunities for investing elsewhere. Other countries and markets may be showing better growth potential.

Investing offshore also increases diversification in your portfolio, lowering your risk.

So there you have it. How to invest when the stock market is nearing new highs.

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How to invest when the stock market is nearing new highs
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