Now Is a Great Time to Invest

This is turning out to be a volatile year for investors. So far in 2008, the Dow Jones Industrial Average has moved an average of more than 400 points every day, compared with a mere 234 points per day last year.

Perhaps even more frightening, the index has lost more than 500 points since last year ended. If the doom-and-gloom prognosticators are right, more turmoil is to come.

So what, exactly, makes this such a great time to invest?

Fear, loathing, and opportunities
All that gloom and doom -- and more -- might be precisely the reason why now is a great time to invest. Don't take it from me, though. Here's Warren Buffett on the matter: "Face up to two unpleasant facts: The future is never clear, and you pay a very high price in the stock market for a cheery consensus. Uncertainty is the friend of the buyer of long-term values."

If everyone were unabashedly bullish on the market's direction, you'd pay a very steep price for such a "cheery consensus." When all of the news outlets talk about how wonderfully the economy is doing, how rapidly earnings are growing, and how bright the future is, that's when you should be the most worried.

On the flip side, when everybody's panicking -- as I believe they are right now -- you have the chance to find bargains with a significant potential upside. Take a look at some of the tremendous deals the market just served up:

Company

Year-to-Date
Price Change

Price-to-
Earnings
Ratio

Market Cap
(in Billions)

Qwest Communications (NYSE: Q  )

(20.0%)

4.0

$10.13

Seagate Technology (NYSE: STX  )

(16.8%)

8.0

$11.17

Marathon Oil (NYSE: MRO  )

(22.8%)

7.5

$33.37

Dell (Nasdaq: DELL  )

(22.0%)

14.4

$42.85

WellPoint (NYSE: WLP  )

(44.7%)

8.4

$25.28

MGM Mirage (NYSE: MGM  )

(41.7%)

9.5

$14.82

Cigna (NYSE: CI  )

(21.3%)

10.4

$11.31

With the haircuts their shares have received this year, these companies are far more attractive than they were just a few short months ago. Most of these large and profitable companies are now trading for low valuations.

Even computer titan Dell looks reasonably priced, for once in its public history. In fact, once you consider that about a quarter of its market cap is cash on hand, it looks downright cheap.

Good companies, cheap prices. What's not to like?

Why so glum, chum?
Of course, there's a catch. The market's downturn didn't come out of nowhere -- it tanked for reasons ranging from general fears about a recession to specific worries about the mortgage market and credit availability.

And although these stocks and others may look cheap enough to buy now, even cheap stocks can get cheaper if the market and the economy continue to show signs of weakness.

That may be discouraging, but for the "buyer of long-term values," it's also another opportunity -- because you may get even deeper discounts.

It's tougher than it looks
This is all easier said than done, of course. It's one thing to talk about the benefits of dollar-cost averaging and doing what's necessary to truly buy low and sell high. And it's something else again to actually invest more of your hard-earned money in a stock or market that has moved against you.

If you don't want to take this trek alone, you don't have to. At Motley Fool Inside Value, we've invested through similar storms before. We intend to be there when the sun starts shining again, flush with the rewards of our value-hunting expedition. If you're ready to profit from this messy market, join us today with a free 30-day trial.

At the time of publication, Fool contributor and Inside Value team member Chuck Saletta did not own shares of any company mentioned in this article. Dell is an Inside Value recommendation and a former Stock Advisor pick. The Fool has a disclosure policy.


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