Right Time in the three-dimension equation of Right Stock, Right Price & Right Time doesn’t mean timing the market but the business environment
My book speaks about three dimensions of Investing in the Right Stock, at the right price and for the right time.
If you want to maximize your returns, you should have to get most of those three things right.
However, when it comes to an understanding of the right time, people often get it as timing the market, which is not the case. It is about the impact of the current environment for the business.
So let me help you understand the dimension right time. However, what is also important is to get each right in that order as well.
The first thing you should get right is the stock part. Then get the price right. And last but still very important is one should get the time right.
The first step is to know the right stocks. I have quite a few articles on how to invest in the right stock.
The first step is to use the Investment Checklist and then apply the Fundamental Analysis.
Once the stock qualifies the above checklist and analysis, then we analyze the business for the business checklist.
Moreover, here are some investing rules to follow.
If stock qualifies on all the above parameters, it is the right stock to invest for sure.
Then we have to understand the technical analysis based on price action to help us understand the right price.
There are many patterns that I use, and I will mention a few that I prefer for the right price, even for investment.
- Breakout Chart Pattern
- Consolidation patterns like flag, triangles, Rectangles.
- Bottom formation patterns like U or rounded bottom, V or W, etc
I have explained each in detail in my book, but you can refer to any technical analysis book.
So when it comes to the right price, the technical analysis study provides a much better choice.
The reason I say Right price is more important than the Right time is that when the price gets too much in the red, I tend to become edgy.
Now we will understand the concept of “Right Time” and why it is the most critical aspect of investing in a stock at the right price.
Often people consider the right time as timing the market entry and exit. However, the concept of the right time is a mixture of how the future will shape up for the business.
Let me share with you an example to help you understand.
Page Industries is one of my favorite stocks. It is, for sure, the right stock in every parameter you put in.
In 2018, when the stock corrected from 26k Odd levels to 20k levels, I found some excellent bottom formation patterns and invested in the stock.
I invested in the right stock at the right price for sure, and then stock ran up to almost 36k. Just FYI, I did book out at around 27k when it started retracing back and re-entered around 22k.
Considering the technical analysis, one can even get into it at the right price as well.
But it wasn’t the right time to invest in the business. The reason being, companies like Van Heusen and others entering the Indian markets and the company is expected to have fierce competition. Moreover, the stellar growth in the company is expected to slow down, and profit margins may see an impact.
So the higher valuation for the stock will either have to cool off or may consolidate for a very long time, similar to Infosys from 2001 to 2005ish.
So an essential aspect of investing in a business is one invest in the right stock at the right price but also at the right time.
However, as a retail investor, one must invest in the right stock for sure. And then one considers the right price and the right time. However, if one can’t have both, it is essential to have at least one of the two, aka Right Price or Right Time.
When I have two of the three things right, over time, the third thing will become right.
I am seeing it happen in my investment in Lupin or Amara Raja Batteries or even Zydus Wellness that I have from 2016-2018.
Lupin as stock is right, and I may have invested at the right price as well. However, the time wasn’t right in 2017-2018. Things were yet to settle for the company, and it is taking longer than one may expect.
However, investment in Pidilite, all three dimensions were spot on, and it is giving me stable returns. The launch of Dr. Fixit made sure the time for investment in 2016 was spot on.
Again, any stock name mention here is not a recommendation. It is to help understand the concept of the right time to invest in a business based on the merger and acquisition or product launch by the company.
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