Should I Buy Stocks Now Amid Such Uncertainty?

Global economic uncertainty and a bewildering disconnect between Wall Street and Main Street shouldn’t mean sitting out of the market.
In a Year of Uncertainty, Should You Still Buy Stocks?

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Tens of thousands of people turn to Google every month to ask if now is a good time to buy stocks. It’s a loaded question, and it depends more on your investing goals than it does on what the market is doing on a given day.

If you're ready to invest and don't need the money for at least five years, then yes, jump in. Even when the market has lows — and 2022 is off to a rocky start — if you're invested for the long term, you'll have time to recover losses.

Here's an example: In late February 2020, the S&P 500 began a historic decline, ultimately finding the pandemic floor on March 23, 2020, and starting a bear market. Historically, it has taken an average of about two years for the market to recover from a crash; this time, it bounced back in just 149 days. By the end of August 2020, the index was once again hitting record highs.

In 2021, and the stock market was still being roiled by unexpected events (we won’t soon forget the GameStop-Reddit-hedge fund saga) and the U.S. economic outlook remained unclear. Still, the U.S. market grew 9.5% in the last quarter of 2021, according to Morningstar.

In 2022, investors are understandably wary. Russia's invasion of Ukraine, record-high inflation, the ongoing pandemic and interest rate increases have all caused volatility. But that shouldn’t mean sitting out of the market.

»Learn more: What Is a bear market?

Understanding the Main Street-Wall Street disparity

The market’s rapid recovery in 2020 was clearly at odds with the U.S. economy. But a closer look shows this imbalance may not be as perplexing as it seems.

The stock market reflects investor sentiment about the future, not what’s happening right now. While retail investors (individuals) might be more inclined to buy and sell based on daily headlines, institutional investors (companies, like banks and wealth management firms) are looking far ahead, meaning the stock market's performance may not always match up with current economic conditions.

The S&P 500 is also market cap-weighted, meaning larger companies will have a bigger impact on its performance (see how the S&P 500 works to learn more about this). Many of the largest companies in the index are in tech — an industry that wasn't hit as hard by COVID-19 in the first two years — and those companies pushed the S&P 500 to its record highs, despite the ongoing economic issues caused by the pandemic. Now, those same companies could be a major factor in dragging down the index (even if some economic indicators are positive) as investors grow less confident in those same tech stocks.

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Timing the market vs. time in the market

When you start investing isn’t as important as how long you stay invested, said Marguerita Cheng, a certified financial planner and CEO of Blue Ocean Global Wealth in Gaithersburg, Maryland. And that’s a maxim to remember right now, too.

“The best way to build wealth is to stay invested, but I know that can be challenging,” Cheng said in an email interview.

It’s easier if you invest only for long-term goals. The reason you don't invest money you may need in the next five years, is because it’s highly possible the stock or mutual fund you purchase will drop in value in the short term. If you need those funds for a large purchase or emergency, you may have to sell your investment before it has a chance to bounce back, resulting in a loss.

But if you’re investing for the long term, those short-term drops aren’t of much concern to you. It’s the compounding gains over time that will help you hit your retirement or long-term financial goals. (See how compounding gains work with this investment calculator.)

How the S&P 500 is doing today

Here's how the S&P 500 is performing today. Also note the long-term averages, which help to bolster the argument that time in the market is more important than timing the market.

Stock market data may be delayed up to 20 minutes, and is intended solely for informational purposes, not for trading purposes. 

The water’s fine, but wade in slowly

One of the best strategies to remain calm and stay invested during periods of volatility is to treat investment contributions like a recurring subscription — a technique known as dollar-cost averaging.

Through this approach, you invest a specific dollar amount at regular intervals, say once or twice a month, rather than trying to time the market. In doing so, you’re buying in at various prices that, in theory, average out over time.

Robert M. Wyrick Jr., managing member and chief investment officer of Post Oak Private Wealth Advisors in Houston, notes this is also an excellent strategy for first-time investors looking to enter the market during times of uncertainty.

“It’s very difficult to time when to get into the market, and so there’s no time like the present,” Wyrick says. “I wouldn’t go all-in at once, but I think waiting around to see what happens to the economy or what happens to the market in the next three, six or nine months in most cases ends up being a fool’s errand.”

So how, exactly, do you start dollar-cost averaging into the market? A common strategy is to pair this with stock funds, such as exchange-traded funds. ETFs bundle many different stocks together, letting you get exposure to all of them through a single investment. For example, if you were to invest in an S&P 500 ETF, you would have a stake in every company listed in the index. Rather than investing all your money in a few individual stocks, ETFs help you quickly build a well-diversified portfolio.

To dollar-cost average you could set up automatic monthly (or weekly, or biweekly) investments into an ETF through your online brokerage account or retirement account. Through this approach, you would achieve the benefits of dollar-cost averaging and diversification, all through a hands-off strategy designed for building long-term wealth.

So, if you’re asking yourself if now is a good time to buy stocks, advisors say the answer is simple, no matter what’s happening in the markets: Yes, as long as you’re planning to invest for the long-term, are starting with small amounts invested through dollar-cost averaging and you’re investing in highly diversified mutual funds and ETFs.

» Ready to get started? Learn how to invest in ETFs and best funds to choose 

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