If you’re asking “should I invest in stocks now,” you’re asking the right question. Too many people sell out as stock prices drop. Fear takes over and people will sell to limit further losses. But that’s usually a bad move.
Of course, stocks can easily drop further. But the tough part is timing when to buy back in. Many people miss the boat as they’re always waiting for even better buying opportunities. And holding cash right now isn’t a great idea with inflation at higher levels.
Research shows the best course of action is to continue investing in the markets over time. A systematic approach with investing monthly, quarterly or even semi-annually can be a good approach.
It’s a way to average out your cost basis. The big benefit is that it limits the negative impacts of emotional trading. To better understand these ideas, let’s dive into some more research. Then we’ll take a look at some undervalued stocks towards the top of my buy list.
Should I Invest in Stocks Now?
In-the-know business leaders are predicting a recession. For example, the CEO of FedEx said he expects the economy to enter a worldwide recession. And who would know better than the leader of one of the top package delivery companies?
Layoffs have started to pick up across various industries. And the Fed is limiting borrowing by boosting interest rates. This is pushing down assets across the board and squeezing consumers. It’s a necessary path to help bring down inflation. If left unchecked, inflation could get out of hand and lead to an even worse situation.
As a result, many companies and consumers are being stretched thin. And all this financial stress has more people asking, should I invest in stocks now?
Investors have already started pushing down stock prices. And looking at most valuation metrics, stocks on average still look expensive. Both the S&P 500 PE and PS ratios come in at 18 and 2.2, respectively. They’re still above historical averages of 15 and 1.6.
Stocks can easily fall further, but no one has a crystal ball. If someone is telling you which way stocks will move with certainty, it’s usually best to steer clear. Here’s a better approach to investing…
Just Keep Buying Stocks
Should I invest in stocks now? Yes! But there are a few key considerations…
There’s one big caveat and that’s timeframe. If you’re a long-term investor, these stock market dips are great opportunities. But if you know you’ll need the cash in the next year, or even next few years, it’s better to put the money in a less volatile place.
On top of that, it’s good to build up an emergency fund before investing. A good rule of thumb is to have six months worth of living expenses stashed away. This provides a good safety net so you won’t be forced to sell your investments when prices are lower.
With any extra cash coming in the door, it’s good to keep investing it. As mentioned, trying to time the market isn’t a good strategy. Of course, you can always get lucky but instead, investing at regular times can be a better way to go.
Spacing out new investments into the same asset over time is called dollar cost averaging. This strategy can prevent procrastination, minimize regret and also avoid market timing. Schwab put together some compelling research that shows the benefits of investing immediately, as well as dollar cost averaging.
With this in mind, you can always invest in broad based index funds. That can be a great way to go. And if you’re looking a more hands-on approach, here are some stocks to consider…
Undervalued Stocks to Buy
- Intel (Nasdaq: INTC)
- Stanley Black & Decker (NYSE: SWK)
- 3M (NYSE: MMM)
- Meta (Nasdaq: META)
- Starbucks (Nasdaq: SBUX)
- British American Tobacco (NYSE: BTI)
- Cisco (Nasdaq: CSCO)
- Unilever (NYSEL UL)
- F. Corp (NYSE: VFC)
- Target (NYSE: TGT)
- FedEx (NYSE: FDX)
- Qualcomm (Nasdaq: QCOM)
Each of these stocks comes with a different set of risks. Although, investors have pushed down their prices to reflect those risks. And of course, they can always drop further. However, I think the risk-to-reward is looking pretty solid.
The companies behind these stocks have long track records of success. And they will likely continue to reward investors for many years to come. Buying into a basket of companies can also lower risk.
Should I invest in stocks now? I hope you now have a better answer to this question, as well as a few opportunities to dive into. Investing can seem complex, but with the right info and temperament, it’s easy to do well. It just takes some time to play out.
To learn from experienced investors, check out these top investment newsletters. They’re packed with tips and tricks from investing experts. Here at Investment U, we strive to deliver the best investment research and ideas…
Brian Kehm double majored in finance and accounting at Iowa State University. After graduating, he went to work for a cryptocurrency company in Beijing. Upon returning to the U.S., he started working with financial publishers and also passed the CFA exams. When Brian isn’t researching and sharing ideas online, you can usually find him rock climbing or exploring the great outdoors.