Knowing when to invest is as important as knowing where to invest. Although investors spend far too much time calculating and evaluating what the best investments are, it is also crucially important to know when to invest. This has not only to do with the market dynamics, but also the sector of each stock you consider to invest in. Knowing how sectors work, and their cyclicality is an often overlooked criteria of when to select the best time to invest. This is why it is important to know the stocks you are investing in, but also the sector they operate in. This will allow you to understand not only the competitive landscape of the sector, but the best timing to invest in that particular stock.
Study the sector
To understand the sector in depth you need to study it. Look at what the supply demand dynamics are, and use that to your advantage. This will allow you to have a much better understanding of how that industry works. It will also increase your knowledge on a specific stock that operates in that industry.
Understand the cycles
Every industry has their own cycles. It is important not only to understand this but to understand exactly what drives the cyclicality. This allows you to look for signs or cyclical changes that might affect not only the stock prices, but the future outlook for a particular stock. Every industry displays a certain degree of cyclicality, knowing the dynamics behind it is a crucial part of investing.
Follow your stock
Following news related to the stock you are invested in is also an important part of the homework you need to do as an investor. Being able to analyze in depth every piece of news that might affect that particular company is one of the most important steps in investing. Another component is the ability to follow sector news, and adapt your portfolio management to these new pieces of information.
Focus your investments in industries you know
Being able to select investments in industries and sectors you are familiar with is another important step to be a successful investor. If you do not have enough knowledge on a particular industry to make an investment decision you should probably skip it. This is because you cannot assess the risk involved with the particular stock. This might force you to select stocks that do not match your risk tolerance.