Yes, you should invest when the market is down—and when it’s up and when it’s sideways. Investing is about reaching your financial goals, and that requires keeping your eyes on the prize in all sorts of market conditions.
But more to the point, if you find that something on your shopping list has gone on sale, you’d definitely buy it and enjoy the savings, right? Stocks should be no different. If you’re already planning to invest, buying while prices are down can be a smart move. After all, “buy low, sell high” is a standard mantra for successful investors.
However, just like regular shopping, it’s not wise to buy things because they’re on sale. If you hadn’t already planned to invest at that time, or if you hadn’t previously shown interest in a particular investment, scooping up cheap stocks for the discount may not be the right move.
For one thing, you may not have the cash to deploy. Then what? Would you sell one investment to buy another? If the whole market is down, that might mean locking in losses just to snag a perceived bargain.
For another, even if you have the cash on hand to do it, your investing decisions ought to be based on your own financial needs, not dictated by market movements. Rushing to buy while stocks prices are lower is just as emotional a reaction as selling when they’re down.
What should I do instead?
A smarter strategy is to create a long-term plan with a regular investing schedule, and stick with it—although that plan could also include building up a cash reserve for making new investments when the price is right. This way, you’ll be ready to make smart decisions whenever a buying opportunity comes along.
January 9, 2019