Buying into the stock market

[Fuddyduddy1952]

Long-term Historically you are correct, if you go back to a long time ago like 1970, but recently (last few years) is a lot different. Golds performance in the last 3 years is incredible.

Gold is up 49% in the last year, while the S&P is up only 13%. Who wouldn’t want to take advantage of that? You buy gold, let it go up almost 50%, sell it, and use the proceeds to trade into buying stocks while they are low.

I get it if you don’t want to actively monitor & trade, but even with 5 minutes spent every few days, you can use gold funds or real gold as a bear market tool to buy more stocks or funds at lower prices.

Bitcoin has been up 242% last 3 years.
Seriously I'd never own cryptocurrency.
Being invested in the market 45 years reinvested then having some of of the dividends & capital gains going into a cash interest account then buying the lows has worked well for me. I've never sold anything.

 

[Oaktree]

Great time to BUY

But you've still gotta do your homework.
Is a stock a quality one that's down just because the market in general is down, or is the stock down because the company has some serious issues, or in a fading industry? If it's the former, yeah, good time to buy. If the latter, and the stock is down for a reason, then buying would be throwing money away.

 

[Hay Dude]

But you've still gotta do your homework.
Is a stock a quality one that's down just because the market in general is down, or is the stock down because the company has some serious issues, or in a fading industry? If it's the former, yeah, good time to buy. If the latter, and the stock is down for a reason, then buying would be throwing money away.

Well of course. Only fools buy stocks of a sinking ship company.
I did take a chance and buy Tesla in the dip and that is working out VERY nicely for me so far.
I’m up $60/share in 1 month.

 

[Hay Dude]

Bitcoin has been up 242% last 3 years.
Seriously I'd never own cryptocurrency.
Being invested in the market 45 years reinvested then having some of of the dividends & capital gains going into a cash interest account then buying the lows has worked well for me. I've never sold anything.

I’m probably a more active trader than you then.
I’ve sold a lot when at peak or high, put proceeds in “cash” account, then bought funds or stocks when low.

 

[Fuddyduddy1952]

I've never bought single stock, only mutual funds. Some pay lots of dividends, Berkshire Hathaway pays none. Our SMA account the traders buy & sell daily.

 

[Hay Dude]

I enjoy it. Sometimes I win, sometimes I lose. I’ve won more than lost and have developed enough common sense to understand why a stock is a buy (well, most of the time). More importantly, not to get in over my head or emotional about any given company.
I also understand why gold is soaring right now. I have always balanced my portfolio with mutual funds, stocks, bonds and precious metals and done nicely.

 

[Fuddyduddy1952]

Funny(?) story my cousin was vp with Dean Whitter now Morgan Stanley. He advised Dad buy 10 stocks. Two went belly up, the others did fair, Apache Petroleum he should have sold in '08. Dad said before he passed 10 years ago long term mutual funds outperformed.
At my age I should be more conservative but it's worked so well I never changed. The only speculative thing I did and it's paid off are select funds like Air Transport after 9-11 the price really dropped so I bought it.
I've never bought a lottery ticket or gambled. A good friend is a poker player & goes to Vegas a lot. He once had $50,000 all in 100 bills rolled up with a rubber band, drove all the way back home to Rancho Palos Verdes only to realize it must have fallen out of his pocket. He drives back to Vegas remembering where he parked and there it was against the curb!
He said in Vegas everyone is looking up not down! He's lost a fortune though, still working at 68.

 

[quicksandfarmer]

But you've still gotta do your homework.
Is a stock a quality one that's down just because the market in general is down, or is the stock down because the company has some serious issues, or in a fading industry? If it's the former, yeah, good time to buy. If the latter, and the stock is down for a reason, then buying would be throwing money away.

A bit about how the stock markets work:

About 80% of all stocks are owned by institutional investors: pension funds, mutual funds, IRA's, 401k's, hedge funds. There are tens of thousands of people who work for these funds as stock analysts. For them, the beginning and end of their job is beating whatever stock index is the benchmark for their fund. If they can do that they make lots of money, if they don't they lose their job.

If your benchmark is, say, the S&P 500, the easiest way to keep your job and make lots of money is to look at the 500 companies in the S&P 500, try to identify ten or so that you think will underperform the index overall, and buy the other 490 or so. On average the S&P 500 has returned slightly over 10% per year since 1957, so you're looking for a handful of companies that you expect the price a year from now to be less than 10% above the current price.

At the same time, tens of thousands of other analysts are doing the same thing. And together, you control 80% of the market. If a bunch of you think a stock will underperform the market and you all sell it, its price will drop. And it will drop until the current price is low enough that it becomes as good an investment as any other stock in the market.

Similarly, if a bunch of analysts think a company will out-perform the market, they will bid the price up until it's no better an investment than any other stock.

In general, at any given moment, all stocks should be expected to be equally good investments. The exception would be if you have information not available to the rest of the market. But for an ordinary investor it's unreasonable to think that you can look at a stock and see if it's a good investment. The market is already doing that work for you.

If you'd like to learn more, I recommend a classic text, "A Random Walk Down Wall Street" by Burton Malkiel. It's in its 13th edition and has been continuously in print for over 50 years.

https://www.amazon.com/Random-Walk-Down-Wall-Street/dp/1324035439/ref=sr_1_1