Stock Market Investing - who is looking to stay invested in a particular company

Many people think that if you are a long-term investor who is looking to stay invested in a particular company for several years, the timing of your entry point is not that important. However this isn't necessarily the case because timing is actually very important.

Okay so it doesn't really matter if you buy a stock at 340p or 345p, for example, if you are planning a long-term investment, but you have to look at the bigger picture. Unfortunately the share price of an individual company is not entirely dependent on their own fortunes. It also moves in accordance with the wider stock market.

There are exceptions of course. If you invest in small-cap stocks then you will find that they are relatively independent of the wider market, and the share price is mainly driven by company-specific news and results.

However on the whole you have to be aware of the wider market when investing in mid and large-cap stocks. The fact is that you could invest in the strongest, most profitable company that is growing both it's earnings and it's dividend payouts every single year. However if the wider stock market is trading at very high levels when you buy the shares, you may find that the share price will be dragged down quite significantly (despite the strong fundamentals) if the wider stock market index suddenly reverses to the downside.

You should also pay attention to the industry the company is in as well. For instance you could be invested in the strongest company in a particular sector, but if you get some negative news coming out which affects the whole industry, there is every chance that the share price of your particular company will fall along with most of the others in the sector.

So the point is that timing is everything. Ideally you should hold on to your money until the wider stock market is massively oversold. When this happens you can simply filter through various stocks to find the strongest most profitable companies, because you can be sure that their share price will also be oversold and trading at bargain levels when this happens.

Similarly if there is a particular sector you are interested in, such as mining for instance, you should wait until this sector as a whole is heavily oversold, and then invest in the strongest companies from within this sector, or those have that have been sold off the most and now represent the best value based on forward earnings projections.

Either way you can generate some significant profits if you take your time and concentrate on purchasing a stock at exactly the right time. Just remember the old mantra - buy low and sell high - and you should do just fine.

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