Is now the right time to buy stocks?
It's a question that's usually followed by further rumination on whether the market has bottomed out, or if a new low might be coming. The reality is that nobody knows, and it does not matter. Sure, you'd love to be able to buy great stocks at low prices, but that's not how you should be making your investment decisions.
While everyone would love to spend less money for each share, trying to time that purchase means you risk paying even more. Look for companies you believe will grow over the long term, and buy shares.
Look for strength
The chart above shows 10 years of stock price history for Walmart (NYSE:WMT), Costco (NASDAQ:COST), Apple (NASDAQ:AAPL), and Microsoft (NASDAQ:MSFT). Yes, there are points where share prices dip. But, in general, the prices of all four of these stocks have steadily climbed for a decade.
In a broad sense, if you bought shares at nearly any point in any of these companies over the past decade, that would have been a good decision. Conversely, if you waited, that was almost always a mistake.
That's generally how the stock market has worked, historically. Sure, if you see the share price of a company you like fall, that would be a good time to buy some stock. However, don't wait for that to happen.
Do your homework and identify companies that you believe will do well in the long term. Those might be Motley Fool recommendations (assuming you're a member of one of our services), or they could be companies you research on your own (or some combination of the two).
Once you know what you want to buy, make a plan to buy shares. That might simply mean purchasing shares (or fractional shares) of the companies if you have cash available. If you add money to your account over time (such as through an automatic payroll deduction), buy shares in those companies as your finances allow.
Buy good companies with long-term growth potential, and don't focus on the share prices. If you think a company won't grow, or that's it's not "worth it," then you probably don't want to own shares in the first place.
Don't make the market complicated
Investing isn't a game. You're not trying to beat anything. Trying to time the market to make a few extra dollars is not likely to work, and it's not worth the effort.
As an individual investor, your biggest advantage is time. Buy great companies (or at least ones you believe are great), and hold onto them for the long term. All four of the companies above -- Walmart, Costco, Apple, and Microsoft -- will likely be smart buys now or at most points over the next decade.
Take a long-term view. Is now the time to buy stocks? The answer is yes, but you have to be in it for the long term.
Will the market fall again due to the coronavirus pandemic? Maybe? Probably? Have we seen the bottom? Yes? No? Perhaps?
If you buy and hold for a long time -- think five years at the minimum -- you will historically win in the long run. That's not easy for many people to do. Seeing your portfolio fall can be painful, but if you have the nerve for it, buying good companies and holding them is a strategy that works.