It's fair to say that 2022 was not a good year for stocks. And many people closed out the year with lower portfolio balances than what they started with.
If you were one of them, you may be itching for a quick market recovery. And that, unfortunately, is not guaranteed to happen.
The stock market has a strong history of rebounding following periods of decline. But that doesn't mean the market will rebound right away after a tumble. So we can't assume we're headed for a bull market this year and that your brokerage or retirement account will regain all of the value it recently lost within the next 12 months.
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But is a bull market likely to happen eventually? Absolutely. And you'll want to be prepared for that. Here's how.
1. Continue to invest
You might think you should wait for stock values to come up or at least stabilize before throwing more money into the market. But actually, the ideal time to invest is now when stock values are down on a whole.
Think about it this way: If you enjoy eating pasta, you could stock up when it's on sale and save money, or you could buy it on a non-sale day and spend more. Granted, you're probably not buying pasta to hold it for a long time and eventually sell it at a profit (because that would be gross), but the point is that it's good to take a similar approach to buying stocks -- capitalize on discounts.
Investing right now might seem risky. But if you buy shares of a given company when they're well below a recent high, then your investment is more likely than not to gain value over time.
The key words, however, are "over time." You're not necessarily going to be sitting on major profits in 2024 if you buy discounted stocks today. But that shouldn't be your goal. Your goal should be to gradually build wealth by loading up on quality investments and holding them as long as you can.
2. Continue boosting your skills as an investor
This really cannot be stressed enough. A great way to make money in the stock market is to know how to identify quality businesses. And there are different characteristics in a company you can look out for. These include:
- Competitive advantages.
- Great management.
- Solid cash flow and debt management.
And that's just to name a few. Use this time now to boost your skills as an investor. Develop different strategies for choosing stocks, keeping in mind basic principles like the need for diversification. If you choose the right stocks now, you could put yourself in a great position to benefit tremendously during a bull market.
We've been stuck in a down market for quite some time, and it's hard to know when things will pick up. But at some point, the market is likely to take a turn for the better. So keep investing and growing your knowledge to put yourself in a prime spot to capitalize once that happens.
