by Matt Frankel, CFP | April 2, 2020
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The short answer is yes, but here's what you should know first.
The stock market has just experienced its sharpest descent into a bear market of all time, and up-and-down swings of 5% or more on a daily basis have become quite common. While we at The Ascent aren't market-timers, historically speaking, if the market has just fallen by 30% or more, it's a great time to start investing for the long haul.
If you're thinking of starting to build a stock portfolio during the novel coronavirus crisis, here are some reasons you should open a brokerage account, as well as some reasons to be cautious.
It's never a bad time to start investing, and that's true now more than ever -- and not just because of the novel coronavirus crisis. Here are some of the best reasons to consider opening a brokerage account now.
We just went through the list of reasons you should open a brokerage account, and there really aren't any good reasons not to. Having said that, there are some words of caution beginners need to hear, especially in today's volatile market environment.
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First, we're not advising you to open a brokerage account for the purpose of moving in and out of stock positions every few days. That's called trading, not investing, and is a form of gambling -- especially in a turbulent market like this. It's very easy to lose money with a short-term mentality.
Second, if you decide to start investing during the novel coronavirus crisis, it's important to be prepared for market turbulence. Would you be ok if your stocks fell another 20% from here? Could you tolerate moves of 5% or more in a single day? Your answers to these questions should be a confident "yes" before you start investing.
Third, it's important to understand that you shouldn't invest any money in the stock market that you may need within the next few years. Make sure your near-term spending needs are met and that you have an adequate emergency fund before investing.
As a final thought, it's important to emphasize that it's never a bad time to start investing, at least from a long-term perspective. This is even true when the market is near the top -- consider that someone who invested at the market's 2007 peak before the financial crisis (arguably the worst possible time to invest in the past two decades) would still be up by about 50% today, and that's not including the power of reinvested dividends.
Over the long term, there's been no better way to grow your wealth than investing in the stock market. But using the wrong broker could make a big dent in your investing returns. Our experts have ranked and reviewed the top online stock brokers - simply click here to see the results and learn how to take advantage of the free trades and cash bonuses that our top-rated brokers are offering.
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