Insights

Should you really buy stocks now or wait a while longer?

Some stocks are trading at incredibly low prices.
The post Should you really buy stocks now or wait a while longer? appeared first on The Motley Fool Australia. –

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

When the stock market is soaring, it’s easy to get into the buying mood. That’s because we actually see investments bearing fruit right away. Even if some share prices are high, the sheer momentum of the whole market offers us confidence that those prices could climb even higher.

But when the stock market stumbles, our eagerness to get in on the action may disappear — and quickly. All at once we ask ourselves how long the downturn will last. We even might doubt the recovery of certain stocks that, in better market conditions, seemed like sure winners.

This scenario is probably playing out for a lot of us right now. The S&P 500 Index slipped into a bear market this week, inflation has been galloping higher, and interest rates are on the rise around the world. Now the question is: Should you really buy stocks right now? Or is it best to wait a while longer? Let’s find out.

The advantages of buying now

First, let’s talk about the advantages of buying stocks now. A huge one is valuation. Many solid stocks have dropped to incredibly low levels. I’m talking bargain basement.

For example, high-growth electric-vehicle maker Tesla (NASDAQ: TSLA) is trading at 56 times forward earnings estimates — down from more than 160 just six months ago. That’s as measures like return on invested capital and free cash flow are climbing.


TSLA PE Ratio (Forward) data by YCharts.

Another example is coronavirus vaccine giant Moderna (NASDAQ: MRNA). The company continues to bring in billions in revenue and profit, and today it’s trading at only 4.6 times forward earnings estimates. That’s down from more than 16 a year ago.

There are plenty of other examples across industries. Today, those stocks that were trading at much higher valuations a short time ago now are available at very reasonable prices.

Another reason to buy now is you avoid the risk of missing out on the eventual rebound. History tells us markets always bounce back. It’s just a question of time. So your favorite players could rise at any moment.

Now let’s talk about the one big disadvantage of buying stocks today — and that’s the risk that the market may fall even more. You might be able to get that stock you’re interested in for an even lower valuation.

And what if stocks remain at this undervalued level for a while? Then you’ll really have to wait to benefit from your investment. This is the reason some investors are hesitating to buy stocks right now.

The importance of long-term investing

Considering these points, what should you do? First, it’s important to note that you only should buy stocks right now if you plan on investing for the long term. By this, I mean at least five years.

This doesn’t mean the downturn will last this long. This is the time horizon I always favor. That’s because it gives a company time to recover — if it happens to go through challenging times such as a period of high inflation. And it gives a company time to grow — no matter what the economic situation.

As always, it’s important to invest what you can afford to invest. That means you should also set aside funds for use in an emergency — so you don’t have to dip into your investments.

As for buying stocks, here’s what I say: When you feel that a company’s business is strong, future prospects are bright, and the price is fair, it’s probably time to get in on that story. So right now could be the perfect time to buy certain stocks.

As mentioned above, share prices could decline further. It’s nearly impossible to grab a stock at its lowest price. But if you invest for the long term, that won’t really matter. You’ll still benefit from your favorite stock’s recovery — and growth in the years to come.

All of this means we shouldn’t fear bear markets. And any day can be the right moment to invest.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

The post Should you really buy stocks now or wait a while longer? appeared first on The Motley Fool Australia.

Wondering where you should invest $1,000 right now?

When investing expert Scott Phillips has a stock tip, it can pay to listen. After all, the flagship Motley Fool Share Advisor newsletter he has run for over ten years has provided thousands of paying members with stock picks that have doubled, tripled or even more.* Scott just revealed what he believes could be the “five best ASX stocks” for investors to buy right now. These stocks are trading at near dirt-cheap prices and Scott thinks they could be great buys right now

See The 5 Stocks
*Returns as of January 12th 2022

More reading

Down 45%, here’s 1 reason to buy Tesla’s dip and 2 reasons to stay away Why Tesla stock sold off 7% today Why Tesla stock jumped 5% today Why Tesla shares were rising today Tesla Looks to Reinforce Its Battery Supply Chain: Why That Matters

Adria Cimino has positions in Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has positions in and has recommended Tesla. The Motley Fool Australia’s parent company Motley Fool Holdings Inc. has recommended Moderna Inc. The Motley Fool Australia has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

This article was originally published on Fool.com. All figures quoted in US dollars unless otherwise stated.

Trade The World Anywhere & Anytime!

Mobile app platform with over 50,000 global listed securities across 12 markets (over 70% global market capitalisation), right from your Android or iOS device.

Integrated with exclusive trading idea and investment analysis tools to help you find actionable insight on virtually every financial instrument across our 12 global markets, to help you optimise your trading strategies.

Refer Your Friends

Tell your friends about Monex and gift them FREE access to our trading tools.

  • This field is for validation purposes and should be left unchanged.

We respect your privacy and will only send this one email notification to your friends. 

Share With Your Friends

Free Share Allocation Reward Levels

STARTER

Class
$ 2,500 Deposit & Trade
  • REWARD^
  • 1 x Marathon Oil Corporation (NYSE:MRO)

ECONOMY

Basic
$ 5,000 Deposit & Trade
  • REWARD^
  • 1 x Pfizer Inc (NASDAQ:PFE)

ECONOMY

Standard
$ 10,000 Deposit & Trade
  • REWARD^
  • 1 x Amazon.com Inc (NASDAQ:AMZN)

ECONOMY

Plus
$ 25,000 Deposit & Trade
  • REWARD^
  • 2 x Apple Inc (NASDAQ:AAPL)
POPULAR

BUSINESS

Class
$ 50,000 Deposit & Trade
  • REWARD^
  • 4 x Apple Inc (NASDAQ:AAPL)

FIRST

Class
$ 150,000 Deposit & Trade
  • REWARD CHOICES^
  • 12 x Apple Inc (NASDAQ:AAPL)
  • 2 x Tesla (NASDAQ:TSLA)
^Please refer to the Free Share Promotion Terms and Conditions for details.

Monex Trading Tools Access and Usage Terms

The Monex Trading Tools (referred to as ‘tools’ hereafter) are available to you inside your client portal;

To activate access to the tools, you must have a verified and approved trading account and have made a deposit of at least AUD $1000.

An active and funded account with a positive trading balance is required to continue to have access to the tools;

Although the tools are available to you, Monex Securities may at it’s discretion disable access to the tools in the future;

Monex Securities reserves the right to change these terms and conditions from time to time, as it sees fit, without notice.

FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here To Get Started
FREE AAPL, TSLA, AMZN, PFE or MRO Share(s)
REGISTER TO BE ELIGIBLE FOR FREE SHARES
TRAVEL ACROSS THE FINANCIAL WORLD
Act Fast - Promotion Ends In
Click Here For More Info