The coronavirus pandemic has left America in a weird state of somewhat being closed for business. Restaurants operate at limited capacities, while movie theaters remain shut down, along with many other businesses that serve large groups of people.
It's hard to know when any semblance of normal will return. Concerts, sporting events, cruises, conventions, and other mass gatherings all remain canceled. Add in the current social unrest in the country, and it seems like a difficult time to invest in the stock market.
In reality, however, if you have cash available -- extra money you don't need for living expenses -- then it makes sense to invest in the stock market.
But when will it hit bottom?
Has the stock market bottomed out? Will it reach new lows that make buying now foolish?
The answer is that nobody knows and you should not let it impact your decision making. The bad news is -- like a second wave of Covid-19 infections -- it could crash the market. It's also possible the good news -- like the creation of a vaccine -- could send the market to new all-time highs.
Nobody knows the answer, and if you try to time the market, you're just as likely to miss out on buying opportunities as you are to get a good deal by waiting.
Make buying decisions based on the companies you're purchasing shares in. Don't look for stocks beaten down by the pandemic or ones that seem like bargains. Find companies where you believe management has set the brand up for long-term growth.
It's always tempting to want to buy shares when they're priced at all-time lows or are at least somewhat off their highs. The problem is that the market can be irrational. A company may report disappointing earnings and see its share price rise. The opposite can happen as well where a good report leads to its stock price falling.
In the short-term, markets do not behave in rational ways. Earnings reports should be fairly dreadful for many companies next quarter. That should, in theory, send their share prices down, but the market could react differently.
Sometimes investors will consider bad numbers to be better than expected. In other cases, they will interpret good numbers as not meeting expectations.
There's no surefire way to predict short-term reactions, but in the long-term, strong businesses see their share price rise. That may not happen quickly -- it could take years -- but patience and tuning out the short-term noise almost always pays off.
Is now the right time to buy stocks?
It's always time to buy good growth companies as long as you're patient. Timing the market is a fool's errand (and not the good kind of Fool). You may make a few extra dollars if the market dips, or you could end up missing out on an opportunity by never buying shares because the price never falls to where you wanted it to.
Be a buyer of companies you believe in and steadily add to your positions as your finances allow. That may not be a sexy strategy, but it's one that has historically paid off.