The stock market may crash. It could also see massive growth.
Both of these things are always true, but they seem magnified in today’s climate. We live in uncertain times due to the coronavirus pandemic, and this can lead to large speculative fluctuations in stock prices.
That can be scary for someone who wants to enter the market, or even someone who is considering adding more shares to their portfolio. The reality is that if you buy a stock and keep it in the long run, you have nothing to fear.
If you have your finances in order, now is a good time to buy shares. Image Source: Getty Images.
Who should buy shares now?
Before you consider investing in the stock market, you need to consider where your finances are. You need to make sure you have some basics covered before you start buying stocks.
- Do you have an emergency fund of at least six months to cover living expenses?
- Have you paid all the high interest rates, including credit cards and personal loans?
- Are you maximizing an employer party in your 401 (k)?
Next, the next thing you need to consider is how much money you have left over each period, whether you define a period per salary, per month, or really by each period you choose. This should be cash that you do not need for 3-5 years.
If you meet these criteria, it is reasonable to buy shares of stock. But before doing so, it is important to have goals, and to know your personal tolerance for risk. Are you investing for retirement in 30 years, or to buy a home in 5? Will having some of your money in risky stocks keep you up at night, and can you tolerate the volatility inherent in investing?
If you have a diverse portfolio full of strong companies, your portfolio will grow over time. This does not mean that it will not experience any drips, suffer from market accidents or have other calamities in the face. It is also important to remember that this can happen unexpectedly, and even really strong companies can sometimes hit areas where their stock prices fall (sometimes by a significant percentage).
Be an investor in stocks
If you want to be a long-term winner in the stock market, you need to be a buy-and-hold investor. Before buying one stock, think about why you want it in your portfolio. Is it because you have read about the company, believed in its mission, and understood its path to success? If so, then you should only sell if something changes your investment stance.
You should not sell shares because a company lacks revenue in projection revenue. It has been proven that fewer trades and longer timeline build wealth. That does not mean that when a company makes a big shift and you no longer believe in it you can not sell, but it does mean that you have to have a pretty high bar for selling.
The stock market plus time can help you reach your financial goals. If you meet the above criteria, the best day to start investing in stocks is today.
Go slowly. Do your homework and make sure you take advice from trusted sources (not people on social media, who may have agendas that are not with you). Keep in mind that you’re playing a very long game, and that’s not always an easy thing to do – but if you can invest and hold these investments slowly for years (or even decades), you’ll get where you want to go.
If you have the money and your finances are in order, now is the time to buy shares. Yes, the market may be volatile – and it may be volatile than normal at the moment – but if you keep your eye on the distant horizon, there is no better time to start investing than now.
