Before buying, you should consider whether it’s a better than average time to invest or if you should wait for a better opportunity..

5 Tools You Can Use to Time Your Investments

Once you have a watchlist of attractively valued long-term investments based on quality forecasts made with a thorough understanding of the business model and competitive environment, and you are ready to invest in one of them, you should consider whether it’s a better than average time to invest or if you should wait for a better opportunity (with lower price or less uncertainty). 

In week four we learn how to use the following tools to better time our investments:

(1) Technical Analysis, (2) Macroeconomics, (3) Long-term Trends & Narratives, (4) Making a Timeline, and (5) Checklist

Technical Analysis

Technical Analysis tools aim to measure the current eagerness of buyers and sellers. The 200-day moving average and Bollinger bands are commonly used indicators. They are the simplest and most intuitive TA tools, and the ones I recommend. They should however still only be used as marginal inputs for better investment timing and not as decisive investment factors.

Macro

Usually, one can (and most often should) safely ignore macroeconomic data. Sometimes however, factors such as the overall market valuation, interest rate trends, or PMI data might matter enough to take into consideration if they are really extreme relative to their normal ranges. Hedgeye’s four ‘quads’, Hussman’s valuation charts, and Howard Marks’ cycle assessments are effective shortcuts to outlining the state of the macro environment instead of doing all the tedious work oneself based on FRED data.

Trends and narratives