Is now the right time to invest in stocks?- WWNEED.Com
The stock market has been volatile lately, and this makes many people think whether now is a good time to invest in stocks.
Warren Buffett often says that getting rich requires a lot of patience. Usually, you have to buy good companies and keep them for a long time in order to achieve growth and thus ensure returns.
However, the idea of “getting rich slowly” has not been a philosophy embraced by many American investors. This seems to have gotten worse over the past few years, with easy access to free trades making it feel like the stock market has been turned into a game.
When you can get in and out of stocks with seemingly no consequences (except for tax liability if you’ve made a profit), your view of investing can change. Only a few years ago trades cost some money and that was a simple check of people buying or selling stocks based on the news of the day.
The fact is that you should never buy or sell Walt Disney (DIS) stock based on daily and short-term stock and company news. You should also avoid, for example, making investment decisions about Disney based on speculation about the impact of higher gas prices or inflation on theme park ticket sales.
Investors buy stocks in companies because they widely see the stock as pointing up and going up over the long term. This is a safer game than worrying about how short-term economic problems will affect stocks or the chances that they won’t be hurt.
The truth is that if you are a long-term investor, whatever happens in the economy over the next few months and even the next few years is not going to change your view of most companies.
But – should you invest in stocks now?
Most solid long-term investments can be bought at a discount right now. You can buy shares in dozens of high-profile companies built for long-term success at prices that may be up to 50% lower than they were at the start of the year.
If you already own shares in some of these companies and see the value of your investment decline, buying more shares at lower prices results in a lower average cost of owning a share. This strategy is called “dollar cost averaging” and is one of the pillars of being a long-term investor.
Basically, if you always buy shares by setting aside a set amount each week, per paycheck, or per month, then you can buy shares in companies you believe in when the price is right. Over time, good companies perform well and their share prices rise.
At the moment, the share price may drop for reasons unrelated to the company. Apple (AAPL) stock — for example, delivered steadily strong quarterly results and the tech giant met its goal of growing service revenue. Despite this history, these stocks are down 25% year-to-date largely because the market has short-term concerns about the economy, supply chains, and costs.
Apple’s quarterly report may be slower than expected, but does that change anything that might affect its long-term success? People might wait a quarter or two to upgrade their phones, but nothing has changed in such a way that they won’t end up spending more money in the App Store and on Apple’s own services.
Short-term market movements are reactionary. They reflect what is happening at the moment based on very broad considerations. Your portfolio – at least the long-term part of it – can benefit from not worrying about what’s happening now.
You can think of it this way: if you were golfing and had a new set of clubs you had your eye on, you would buy those clubs if they were halved, even if you don’t have time to go any time soon. A bear market helps you build your portfolio for long-term success.
The challenge here, of course, is finding the right companies to do it. Consider the Apple model above and assess whether everything that appears to be affecting a company’s stock is hurting its business now or in the long term.
Consider Walmart (WMT), Target (TGT), Costco (COST), and Amazon (AMZN) because they face higher costs and have chosen not to pass them all on to customers. It could be said that this is a positive thing, but the short-term market is focused on the less profitable part, not the part that is still making money while building stronger customer relationships.
Kroger (KR) faces all of those short-term concerns now, but it has to compete with Amazon, Wal-Mart, Target and Costco, which are all heavily invested in groceries. This suggests that Kroger has a long-standing costly problem that may be difficult to solve.
The top four companies may be battling each other, but they seem set to be market leaders for decades.
* Disclaimer: The content of this article is for informational purposes only. The information provided should absolutely not be considered as investment advice or a recommendation. No warranty is made, express or implied, as to the accuracy of the information or data contained herein. Users of this article agree that Money Secrets does not accept responsibility for any of their investment decisions. Not every investment or trading strategy is suitable for anyone. See the risk warning statement.
* Disclaimer: The content of this article is for informational purposes only. The information provided should absolutely not be considered as investment advice or a recommendation. No warranty is made, express or implied, as to the accuracy of the information or data contained herein. Users of this article agree that Money Secrets does not accept responsibility for any of their investment decisions. Not every investment or trading strategy is suitable for anyone. See the risk warning statement.
