It seems like there is never a good time to buy a stock. For the last several month, there was a big Supreme Court decision in the works that could affect the economy. Before that, there was the crashing of the housing bubble. Before that, we were going to war in Iraq. Before that, we were going to war in Afghanistan. Before that, the dot-com bubble had burst. Before that, taxes were being raised. Before that, the Government was trying to take over healthcare (in 1992).
The fact is, it never seems like a good time to buy stocks. There is always something going on that can cause you to worry. If you select good companies, however, they will be able to deal with the things that come up. Their share price may well decline if the whole market heads down, but they will come out stronger companies with fewer competitors if they are well-managed.
You can also never tell when some piece of bad news will come out. It was just a cool, clear September day before a jumbo jet was crashed into one of the twin towers. It was just another day of trading before the flash crash occurred. The housing market was still red-hot just before the bottom fell out in 2008.
If you sit around waiting, eventually you will be right and the market will decline. In the meantime, however, you may miss out on some really big advances. So rather than worrying about what may happen, do the following:
1) Buy the business rather than trading stocks. Invest in companies that have a good future and be ready to hold so long as the company continues to have a good future regardless of the share price.
2) Buy in a little at a time and always be building up more money to invest.
3) If stocks are “on sale” after a big decline, buy more.
4) Diversify as your net worth grows by buying different stocks and mutual funds. This includes stocks in different sectors and multinational and international stocks. Also buy fixed income assets, quality heirloom furniture, fine art that you like, and real estate (directly or through REITs). Don’t let any one asset contain more of your worth than you can stand to lose.
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Disclaimer: This blog is not meant to give financial planning or tax advice. It gives general information on investment strategy, picking stocks, and generally managing money to build wealth. It is not a solicitation to buy or sell stocks or any security. Financial planning advice should be sought from a certified financial planner, which the author is not. Tax advice should be sought from a CPA. All investments involve risk and the reader as urged to consider risks carefully and seek the advice of experts if needed before investing.