Is now a good time to invest? That’s a good question as the stock market is notoriously volatile. Recently, we just entered a BEAR MARKET (I will talk more about this down below) and I have a lot of followers from TikTok asking me if it’s a good time to invest now.
From the last 3-4 years that I have been investing aggressively, the stock market can go from can go from all-time highs to all-time lows in just a matter of days and weeks and is heavily linked to the global economy, interest rates, and politics.
A single event can cause a ripple effect that moves across the market in unpredictable ways, and can even cause a crash. Just look at what happened when the Covid pandemic started in 2020.
If you have your money in the stock market, you’ve probably wondered if you should take it out. I know I had that thought when I started investing.
Investing during bear vs bull markets: When is a good time to buy stocks?
Bear markets are periods when the stock market is on a downward trend. It’s when the investor sentiment is down due to some factors like political uncertainty, war (like the Ukraine-Russian War), market saturation etc.
Bull markets are the opposite of bear markets. This is when the investors are happy and optimistic. They’re periods when the stock market is on an upward trend. They can be caused by positive economic indicators, such as low unemployment rates and high consumer confidence.
So, is now a good time to invest? And more specifically, when is a good time to buy stocks? Whether you’re in a bear or bull market, the answer is: it depends.
If you’re a long-term investor like me and not planning to take out your money for another 10+ years, then bear markets present an opportunity to buy stocks at a discount. But in a bull market, this is your chance to buy stocks while they’re on the rise. As you can see, opportunities exist for buyers in all markets.
Personally and from long term investor experts, whether it’s a bull or bear market, ANY TIME IS A GOOD TIME TO INVEST. In fact, you probably should have invested yesterday. Why? Because every day you invest your money, you’re more likely to earn money on your investments. That’s because of two factors:
1. The stock market has historically gone up
If you look at history, you’ll see over time, the stock market has always gone up. This means that even if your portfolio performs badly over the course of a single year and you lose money, you’re likely to gain it back in a few years.
WHEN IN DOUBT, ZOOM OUT!
2. The power of compound interest
Compound interest is the 8th wonder of the world according to Albert Einstein. it’s interest on interest you earn with your initial investment. It truly works like magic.
Think of it this way; If you invest $100 in individual stocks and you get a 10% return, you have $110. If you leave that money in the stock market, you not only gained $10, but you will also get a 10% return on that $110, giving you earnings of $121, and so on.
Of course, the stock market can be complicated and volatile. But like I wrote earlier, if you are a long term investor, compound interest always works in your favor.
Is now a good time to buy stocks?
You can never time the market. It’s UNPREDICTABLE. Nobody, not even the experts, knows how it will perform tomorrow or the next day.
So, is now a good time to buy stocks? Individual stock picking can drive yourself crazy. It’s hard to tell whenever a stock will go up or down. Personally, I prefer to invest in index funds for this reason.
READ: 5 INDEX FUNDS THAT WILL MAKE YOU RICH
LEARN: HOW TO INVEST IN INDEX FUNDS AND DIVIDEND STOCKS
You may have heard experts saying ‘buy the dip’ or ‘buy low and sell high.’ This is just another way of people trying to time the market. The truth is that no one knows if the stock market is going to be at an all-time high or low tomorrow.
Instead of timing the market, you should try to diversify your portfolio in order to get a dollar-cost average when it’s time to retire. Keep in mind that you can start small and don’t need A LOT OF MONEY TO INVEST. I started with just $50/month because that’s all I could afford at the time.
READ: LUMP SUM INVESTING VS DOLLAR COST AVERAGING
I really like DCA (Dollar Cost Averaging) and highly recommend it to investors to lower risks. I automate most of my investments and this gives me peace of mind.
Key factors to keep in mind when asking the question is it a good time to invest:
1. Have clear objectives
It’s important to keep in mind why you are investing in the first place. I always talk about this and always ask ” What is your goal for investing?” Is it retirement? How much do you need to live on during retirement? Are you investing for short term like buying a house? Are you saving up for a wedding? For your children’s schooling?
Having a clear goal in mind and revisiting those metrics often will help you figure out the best investment strategy for you. It will also keep things in perspective when you’re feeling overwhelmed with the volatility of the market.
2. Understand your risk tolerance
This is very important in investing. Depending on your age, income, and goals, you may want to have a riskier portfolio. Or maybe you want to err on the side of caution and have a conservative portfolio.
Either way, it’s important to know how much you are willing to lose from your investments. All investments are RISKY (just have different levels)
If you have a longer time frame, then you can probably afford to take some more risks. But if you’re going to need your money soon, then it probably makes more sense to invest in something with more stable returns, like fixed-income investments such as bonds.
3. Have broad diversification in your investment portfolio
Having a diverse portfolio is another way to protect your portfolio against volatility. Not putting all your eggs in one basket will help lower down your risks and protect your investments. Consider investing in index funds/ ETFs. You can also diversify byh investing in different sectors.
4. Think long-term as you ask yourself, “Is now a good time to invest?”
If you read the news on a daily basis, it’s easy to get overwhelmed. Stocks can go up and down multiple times in ONE DAY. It will be stressful to watch your investments on a daily basis. Remember that most investments are investments for a reason. THEY ARE MEANT FOR LONG TERM. You should be in for the long haul.
So, is now a good time to invest? Sometimes the answer is “No”
While now is always a good time to invest, there may be situations where it is better to wait.
- You have no emergency savings – You need money to invest. IF you are living paycheck to paycheck, you might not want to invest and instead focus on building an emergency fund first. READ: WHY YOU NEED AN EMERGENCY FUND
- You have high interest debt and have no plans on paying it off right now
Again, so is now a good time to invest? The answer ultimately is “Yes”
So, is now a good time to buy stocks and invest in the market? Yes. This is especially true if you’re a woman. Not only is there a gender pay gap but there is also a gender investing gap. While it’s not fair at all, it’s reality.
If you want to become financially stable, it’s time to invest in your future and take advantage of every investment opportunity you can.
