First, I want to say that I’m not an expert when it comes to investment. However, I wanted to share this information I picked up from a seminar. This is one of the indicators to note when you want to invest and I think it would be useful if you are a contrarian investor. If you are the “go with the flow” investor, then probably this won’t be useful.
The Fear Factor chart better known as the Volatility Index, shows how volatile the market is. The higher the index, the more volatile, the more it indicates that investor are feeling fearful. The lower the index, the less volatile and investors are feeling safe.
While there is reason to invest in stock that are low in price, this does not mean investing blindly. You have to know the underlying company’s financial state. Is the fear well founded or irrational. People flee a stock for a reason. However, for good companies during times of uncertainty, when prices have dropped, it may make sense to invest.
Warren Buffett says "Be fearful when others are greedy; be greedy when others are fearful." This doesn’t mean be lazy!
Like I said in the early part of the post, this index is an Indicator.
You can see the chart at Yahoo Finance
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