Should you really buy stocks right now? | Economic news

As of May 20, the S&P index of the 500 largest American companies was down 18% since the start of the year. The Nasdaq stock market fell much more – 27%. Big dips naturally rattle many investors, sending them heading for the doors. Indeed, many investors selling are what send the global stock market south in the first place.

With all this panic and all this selling going on, what should we you To do? Well, there are good reasons to think you should avoid the crowds and buy some stocks. Here’s a look at whether you should.

Image source: Getty Images.

Don’t buy stocks now if…

To be fair, a lot of people should do not investing in stocks right now:

  • Don’t buy stocks now if you have a lot of high-interest debt; pay that first. You can expect to earn 10% or 12% or more, on average, per year in stocks, but that’s not guaranteed – and if you pay 16%, 20% or 25% interest on your debt, you’ll lose ground. .
  • Don’t buy stocks now if you don’t have an adequate emergency fund. You should aim to have at least three months of all living expenses available in case you lose your job or have a costly medical condition or even just need a new transmission. To be more conservative, have more than three months worth available.
  • Don’t buy stocks now if you can’t manage the risk. The stock market will always be volatile to some extent. There are stock market crashes or corrections (falls of more than 20% or between 10% and 20%, respectively) approximately every two years on average. But the market has always recovered from a downturn, and there’s no better way to build wealth over many years than in stocks, so consider reading up on stocks and investing, to feel more comfortable with the idea. For example, you should know not to invest in stocks that you will need for the next five years or so, because you don’t want an unexpected downturn in the market just before you have to sell.

Buy shares now – made easy

If you are free from high-interest debt and have an emergency fund and you know what to expect from the stock market, it’s a great time to invest in it, as many stock prices are depressed. It can also be very easy to do if you stick with low fees and a wide market. index fundssuch as those following the S&P500. Here is an S&P 500 index fund and two other solid index funds to consider:

  • Vanguard S&P 500 ETF (NYSEMKT: VOO)
  • Vanguard Total Stock Market ETFs (NYSEMKT: VTI)
  • Vanguard Total World Stock ETF (NYSEMKT:VT)

Respectively, they will quickly have you investing in around 80% of the US stock market, the entire US stock market, or pretty much the entire global stock market. (There are plenty of other good ones, low-cost index fundssome of which target bonds and other market segments.)

A great way to build wealth over time is simply to keep adding money to one or more index funds.

Many good stocks are on sale

If you want to grow your wealth even faster, you can add growth stocks to your mix. Growth stocks are linked to companies that are growing at a faster rate than the average. They can offer incredible returns, but they can also be more volatile and risky and often trade at rather high levels. With the market so low lately, however, most of them are trading much lower, which is great!

Here are some solid companies you’ve wanted to have in your portfolio for a long time. If so, you’re in luck, because they’re on sale:

Store

Change from the 52 week high

Airbnb

(47%)

Amazon.co.uk

(43%)

Apple

(25%)

Home deposit

(32%)

Metaplatforms

(50%)

Microsoft

(28%)

Nike

(40%)

Nvidia

(52%)

PayPal

(74%)

Starbucks

(42%)

waltz disney

(45%)

Data source: Yahoo! Finance. Author’s calculations.

Many popular smaller companies have seen their shares fall much more – around 80% or more. Some of them can also be good to buy and hold – but remember that just because a stock is down sharply doesn’t mean it’s a good deal. Some stocks fall for good reasons. For the sake of diversification, remember to follow our Motley Fool’s Investment Philosophy, buying 25 or more shares and aiming to hold them for at least five years. Stick with them, though, in case some lose their promise. Do not buy and hold blindly.

So should you buy stocks now? The answer for many of us is yes.

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John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a board member of The Motley Fool. Randi Zuckerberg, former director of market development and spokesperson for Facebook and sister of Meta Platforms CEO Mark Zuckerberg, is a board member of The Motley Fool. Selena Maranjian has positions at Amazon, Apple, Meta Platforms, Inc., Microsoft, PayPal Holdings, Starbucks and Walt Disney. The Motley Fool has positions and recommends Airbnb, Inc., Amazon, Apple, Home Depot, Meta Platforms, Inc., Microsoft, Nike, Nvidia, PayPal Holdings, Starbucks, Vanguard S&P 500 ETF, Vanguard Total Stock Market ETF, and Walt Disney . The Motley Fool recommends the following options: January 2024 Long Calls at $145 on Walt Disney, March 2023 Long Calls at $120 on Apple, January 2024 Short Calls at $155 on Walt Disney, July 2022 Short Calls at 85 $ on Starbucks and short calls from March 2023 to $130 on Apple. The Motley Fool has a disclosure policy.

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