The stock market has been surging, leading to a recovery from the coronavirus related government-shutdown and its attendant economic aftermath. Yet there is legitimate concern that this is a bubble ready to pop. That’s certainly a possibility for over-hyped stocks, but it may not be true for the stock market as a whole. With all things considered, is now a good time to invest in stocks and shares?
Have an Emergency Fund
Many people buy a hot stock because they want to win big at the stock market. Unfortunately, they are often risking money they can’t afford to lose.
First, don’t invest money you need to pay your upcoming bills, and don’t invest money you can’t afford to lose. Second, have an emergency fund to cover several months of living expenses. Once you can pay your regular bills and any unplanned expenses, then you can begin investing that money in the market.
Understand the Gap between Headlines and the Real World
Don’t let the headlines make you afraid. You’re going to hear the most extreme stories in the headlines, whether they are terrifying or exciting. In contrast, professional investors make decisions based on long-term trends and the market fundamentals that make a particular stock or sector fund a good buy.
Don’t buy stocks because of a great headline, because it is probably overpriced by the time you can react to the news. Don’t sell because of a bad headline, either. If the stock is good, many industry analysts use that as a buying opportunity. This means that you don’t have to stay out of the market because of one or more sensational doom-and-gloom headlines.
Focus on the Long-Term
Very few people make money day-trading. It is better to invest for the long term, especially in tax-advantaged retirement accounts.
Read a market forecast that predicts the trends in a given market for the next few quarters or for the next few years. Buy investments that will go up for the next few years, whether it is a good mutual fund or dividend-paying stock. You’ll see decent returns, and you don’t have to deal with volatility. This is why you can choose to invest in high-quality stocks regardless of overall market conditions.
Start Small and Keep Going
Don’t wait for the perfect moment to invest your life savings in the stock market. Start small, investing a few hundred or a few thousand dollars. This helps you mitigate your risk. Then keep going, investing modest sums at regular intervals. This will add up over time, and it offsets the need to gauge the market.
If you are investing $300 a month every month by buying mutual funds, you’ll buy more when the stock market is down and buy fewer shares when the market is up. Furthermore, starting small and continually investing allows you to get started today. The ups and downs of the stock market matter less if you’re investing for the long-term. Then it doesn’t matter if the stock market crashes, because there is a strong chance it will eventually recover.
If you make wise investment choices, it is always a good time to invest in stocks and shares. Manage your risk, start small, and keep going, and you will become a successful investor.