Did You Miss the Best Week to Buy Stocks?

A decade from now, we very well may look back and say that the first week of March 2009 was the best week to buy stocks in more than a generation.

That Monday, the U.S. government announced another bailout of AIG, and the Dow Jones Industrial Average fell 4% to 6,736 -- below 7,000 for the first time since 1997, marking a full 50% drop from the October 2007 highs.

Breaking that psychological barrier of Dow 7,000 was apparently too much for many investors to bear.

More than $22 billion was pulled out of equity-based mutual funds over the following week, and news stories were rife with capitulation from analysts. My favorite lines included:

• "It's like an unending nightmare."
• "Why should I step out in front of a train?"
• "This is the time for hysteria."

Even the slightest contrarian investor had to perk up at such blatant bottom talk. If there was ever a time to buy when there was blood in the streets, that was the week to do it.

Pigs get slaughtered
Fast-forward just a few months. The S&P is now up 50% off its March 6 lows of 666.79, and about a third of the S&P 500 members are up more than 75% over the same period. The biggest winners include:

Source: Capital IQ, a division of Standard and Poor's.

Since that first week in March, we've seen a number of positive signs from the market, including tech bellwether Oracle beating analyst estimates and announcing its first dividend.

There have also been numerous economic reports that seem to indicate an end to prior months' freefall. On the back of low mortgage rates and an $8,000 tax credit, pending home sales are 6.7% above last year's figure -- to the delight of home-improvement retailers like Home Depot (NYSE:HD).

But let's not get too excited
Yes, this is only a five-month period, and yes, we could certainly see more volatility in the market in coming months. But this simple example is a stark reminder to remain rational and patient while those around us lose their heads.

With a little fortitude and a little cash, you can take advantage of tremendous long-term buying opportunities when the market sells off again -- and it will, but perhaps not back to March lows. So if you missed the chance to buy during the point of maximum pessimism, don't panic. If this market's taught us anything, it's that we'll have another shot to buy bargains if we just remain calm. 

To get started, begin compiling a list of stocks you'd be happy to own for the next five years and beyond. Ideally, these will be companies that are:

1. Built to last 100 years or more.

2. Dominating growing industries.

3. Led by committed and proven management teams.

4. Governed by the highest corporate values.

5. Consistently increasing shareholder value.

Our Motley Fool Stock Advisor service believes that Aflac fits the bill perfectly, and the team recently named it as a "best buy" right now. If you'd like to learn about the other stocks we're recommending at Stock Advisor, a free 30-day trial to the service is yours. Just click here to get started.

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This article was originally published March 30, 2009. It has been updated.

Todd Wenning shorts herd behavior and owns shares of Home Depot. Intuitive Surgical is a Motley Fool Rule Breakers pick. Aflac, eBay, and FedEx are Stock Advisor recommendations. eBay and Home Depot are Inside Value picks. The Fool's disclosure policy can get you where you need to go.