Should I invest in stocks right now?

When we talk about investing with folks, we get the same repeated questions over and over. Most people ask the question, when should they invest and what should they invest in?  These are great questions, however, if you are wondering what the answer is to this question, you should hold onto your cash and consider a few things first.

Most all the great investors over the past century are notorious for investing when there is blood on the streets.  What this means, is that they invest when there is panic among the masses due to a stock market crash, recession or even a depression.

With that in mind, you may want to look at where the broad markets are regarding valuations right now.  Are over all markets at their peaks or are have they lost a lot of value in the past months or years?

You can pull up any chart online and look at the S&P 500 or DOW Jones Industrial average to see where broad markets are right now.  You can do the same for any individual stock or sector of a market as well.

 

What is the assets value worth to you?

Find out what asset class, stock, broad market or industry sector interest you most and look at prices on those assets.  Ask yourself, does the price reflect your opinion of the current valuation?

For example, do you think that Facebook stock is worth $131.33 per share at the time of writing this?  Do you think it should be worth more or less?  If you think the stock is worth more, then one could say, it’s fair value or possibly even undervalued in their opinion.  It might be time to consider investing in Facebook if you believe in what the company has to OFFER regarding VALUE.

It should come down to what the individual sees as the underlying value of that asset, that predicates weather or not they should invest.  Unfortunately, a lot of investors don’t ask them selves this question because often, they tend to seek investments based on human emotions.

You have heard the phrase “Buy low and sell high” right?  So many times, in the past, we have seen assets sky rocket in price based off nothing more than HYPE or news of some event.  The masses get excited and think they CAN’T LOSE if they invest in the asset and most of the time, end up losing money because they got in too LATE or at the peak.  They basically do the opposite of what you see in the chart below.

 

We call this FOMO or fear of missing out.  What is fear of missing out?  As an investor this emotion will almost always GUARANTEE that you LOSE money.  We don’t want to LOSE money as investors, so it’s important to avoid becoming victim to this emotion of FOMO.  This brings us to the next mistake that investors make, when trying to time the markets.

 

Is Timing Markets a bad idea? 

Timing markets usually does not work short-term because no one can predict what markets are going to do day to day.  You can teach yourself technical analysis and fundamental analysis which is studying charts and paying attention to global market news.

Sure, these two things can help increase your odds of timing markets but it’s not a very good way to build wealth for the long haul.  You might get lucky a few times but eventually you will get it WRONG and you will LOSE.

Several studies have been done on timing markets from the greatest investors and hedge funds across the world.  Studies have proven that over a time span of 5 to 10 years, around 2 to 4% of professional day traders will beat the overall returns of the S&P 500 Index, which on average is 9% annually.

These are professional day traders on Wall Street, so if the other 96% can’t do it, what makes you think you can?  So, if timing markets and stocks short-term doesn’t really work in your favor, then what does? When is the best time to invest?

 

The best time to invest as an investor

Warren Buffet has made his largest returns when he has invested in stock market crashes.  Sir John Templeton, another billionaire investor, revolved his whole investing career around investing when there is mass panic among investors.

If you remember earlier, we spoke of “blood on the streets” and human emotion.  We also touched on valuations, based on what the value of the asset means to you.  When you are aware of these different variables to consider before you invest, then you’re much more prepared to invest and come out on top.

What those two great investors have in common and what has made them fortunes in their lifetimes, is being able to master buying LOW and selling HIGH.  They BUY LOW when there is fear in the markets because their ODDS of winning drastically increase in their favor.

If you can remain calm when most people are running for the hills, only then are you in a much better position to REAP the rewards and massive GAINS from your investments.

By remaining calm and looking at the value, instead of selling into the FEAR of the mass populations, you can make much better investment decisions.

We are not saying that you are always going to make massive gains right away if you buy stocks when there is a correction or recession.  You must be patient when you are considering the right time to invest.  We leave you with this last little bit of advice or quotes from Warren Buffet on the topics we have covered in this article.

Warren Buffet quotes:

1. “The stock market is a device for transferring money from the impatient, to the patient.”

 

2. “Be fearful when others are greedy and greedy when others are fearful.”