I reckon it can be folly to try to time the purchase and sale of shares by watching the main indices, such as the FTSE 100. For the little success such a tactic often brings, I may as well look for signs in the tea leaves at the bottom of my mug.
For example, for the past few days, many commentators have been shouting about the possibility of a stock market correction. But it’s probably already happened by subterfuge — many stocks have been drifting lower recently despite the indices remaining quite firm.
Markets often do the opposite to what we think
On top of that, when everyone expects one thing, the opposite often happens in the markets. And that makes sense. Because if there’s a consensus of opinion that a crash or setback is inevitable, most of the investors fearing one will likely already have positioned themselves accordingly. So, by the time an idea such as an imminent crash is all over headlines and bulletin boards, the news is often already in the price.
However, even my own ruminations on the subject are no better than tea leaf watching. A far better tactic is to focus on the individual stocks I’m interested in and the businesses behind those names. After all, index watching is no more than a distraction. And if it influences my trading decisions, it could prove to be a costly one.
Nevertheless, I reckon it’s important for me to have an opinion and a sense of conviction as an investor. And to achieve that, I’m scoping back a little from the day-to-day cut and thrust of the markets. Then, from the perspective of investing with a three-to-five-year time horizon in mind, I find myself to be bullish about the prospects of many UK businesses.
Mind you, I’d like to invest and hold my positions for longer than five years. And if investments continue to perform for me, I will. However, three to five years is a good starting point. And within that time frame, there could be several positives.
FTSE 100 stocks I’m aiming to buy
For example, many UK businesses have already made a remarkable recovery from the effects of the coronavirus crisis. And there are loads of UK companies experiencing strong incoming cash flow, elevating profits and decent forward-looking prospects.
And I’m optimistic that the world has learnt a lot from the pandemic and will build future economic activity in a more sustainable way. Indeed, to me, the environment for businesses looks set to improve.
So I’m keen to buy some of the stocks that have eased back recently. For example, in the FTSE 100, I’ve got my eye on UK shares such as packaging suppliers DS Smith and Smurfit Kappa. I like the look of energy company SSE. And I’m attracted to the prospects for international distribution and services business Bunzl.
All those stocks are high on my watch list. However, there’s no guarantee they’ll go on to perform well for me. After all, shares carry risks. But I’m using the recent stock declines as a jumping-off point for further research with the aim of adding them to my diversified, long-term portfolio.