Buying right at the bottom is every investor's ultimate fantasy. Just imagine if you'd bought equities in the dark days of late 1974, right before the FTSE's best ever one-year performance. Or if you'd invested in the early 1980s, as the market was preparing to embark upon a multi-year bull run. You'd have made an absolute fortune and would have been able to dine out on the story ever after.
Of course, received wisdom has it that trying to call the bottom is a mug's game. It's as much of an ego trip as it is a money-making exercise and, as such, it usually ends in failure. Deep down, we know this to be true. Common sense tells us that real bull markets can last several years and take the market up a few hundred per cent. Therefore we shouldn't care about missing out on a few per cent here or there in its early stages.
That said, there is logic to buying shares when the stock market is on its knees. Professional investors traditionally do exactly that, but private investors hold back, choosing to join the party only in its later stages. This was exactly the pattern we observed during the last bull run, with retail buyers sitting on their hands when the market bottomed in March 2003 and then piling in as it reached its climax last summer.
So, with this in mind, we've researched what major stock market bottoms look like. We've looked at valuations, the economic backdrop and technical analysis, as well as the performance of various industries around these times over the past five decades. While we warn against using our findings as a market-timing system, they should inspire you to buy shares at the troughs where others fear to tread.
