Should I Buy Stocks Now? 6 Factors To Consider

One of the biggest questions on everyone's mind is if they should buy stocks now. When times are great, and the stock market is at all-time highs, people often worry about an impending crash. They are concerned if they buy stocks now, the stocks will crash. 

I can understand why everyone gets nervous buying stocks at all-time highs, wondering if this is the ultimate top. The biggest challenge in answering “should I buy stocks now” is what are the alternatives.

Stocks are volatile. Volatility is a feature of the stock market, and there is nothing you can control. You can diversify based on size, quality, region, sector, etc. At the end of the day, in case of an economic shock; all stocks will decline. 

Acknowledge The Volatility

It can be hard to see your stock portfolio cut in half. During the housing crash, I was overweight in financial stocks. It was not easy to watch most of them drop by 50%, and some, like Lehman, even went bankrupt. The worst thing you can do in a crash is to let your emotions take over and panic sell.

Figure Out Your Pain Threshold

The 100-year chart shows that in some instances, after a fall, stocks did not regain their original levels for 30 years. However, if you held on to your stocks and kept dollar-cost averaging, you would be handsomely rewarded.

Define Your Time Horizon

Asset allocation involves balancing risks and rewards in your portfolio by investing in several different assets. The purpose of adding assets besides stocks is that when stocks are down, the other assets can help stabilize the portfolio.

Diversify With Other Asset

Although you have a well-defined asset allocation plan and diversified assets, it is hard to get away from the constant barrage of stock market news. Every news outlet or newspaper talks about economic conditions. The flurry of stock market news tempts us to act on either buying or selling immediately. 

Ignore Stock Prices