Is Investing in Stocks Still Viable Today? | Jeffrey Althoff | Personal Stock Trading
You may ask if investing in stocks is still viable today? There’s no simple answer to the question. Making money in stocks doesn’t rely on market timing. No one knows how to time the market over the short term. However, buying and holding stocks over long periods of time tends to create wealth.
Putting cash into the stock market now may create fear in some investors. No one wants to buy a stock at the market high.
Is this is a good time to buy stocks , or is it best to wait for a selloff?
Individual Stocks or Stock Market Index Funds
An individual company may present a compelling opportunity regardless of stock market levels, e.g., the Dow Jones Industrial Average (DJIA). If you believe that the company’s prospects are strong in the short term, waiting for a downturn might not make good financial sense.
In contrast, an index fund reflects many companies. If you buy the index fund now at age 25 and plan to retire at 65, the stock market may rise substantially in 40 years. A market selloff might save you 10–15 percent in the price today but does that matter if the original price today appreciates manyfold?
Invest Consistently to Lower Your Cost Basis
Dollar-cost averaging is a smart way to acquire shares in a company. Let’s say that you want to own ABC shares for the long term. You are concerned about a correction. The company is a consistent performer. Buy a little ABC this month. If the share price of ABC goes down, acquire more to decrease your average cost per share.
Use the same strategy to own index funds. Buy some now. If the market corrects, buy more to lower your average cost.
Buy Quality Stocks for Long-Term Growth
For many professional investors, the broad market matters little to nothing at all. For instance, Warren Buffett searches for undervalued stocks and other securities. He is a long-term investor.
Recognize that buying quality companies is a reliable way to produce long-term capital gains. However, don’t assume that all blue-chip stocks are rock-solid. Almost all companies have ups and downs over time.
In comparison, growth stocks have the potential to out-perform “stodgy” blue chips. Growth companies can rise faster in a bull market, but they tend to pull back more than the broad market in a selloff.
A market correction may be a buying opportunity for the sophisticated stock market investor. For that reason, investing in stocks is still viable today.
Originally published at https://jeffreyalthoffminnesota.com on January 19, 2022.