Investing In the Stock Market Right Now: A Good or Bad Idea?

One of the worst months for the stock market was January 2022. The worst month since the COVID-19 pandemic began in March 2020.

The negative market activity has left some wondering if they should be investing right now. The simple answer is yes.

Think of Market Dips as Discounts

Stock investing is volatile, it has always been, and there’s no reason to believe the opposite.

If you believe in the long-term potential of the companies you are investing in, then the short-term price movements shouldn’t concern you too much. Instead, see those downturns as discounts.

Let’s say you buy 10 shares of a company at $200 per share.  If the price drops to $180 and you buy 10 more, your cost basis is now $190 per share. This means if the price rises to $200 again, you’ll have $200 in unrealized gains.

Focus on Your Long-term Goals

Don’t invest every time you feel the market is “good.” Instead, make consistent investments over time, regardless of the market conditions at the time.

No matter the market conditions, continue investing. If the market is bad, contributions still happen. If the market is good, contributions still happen. That’s how dollar-cost averaging works.

Keep in mind that there are two main ways to get paid from stock: An increase in the share price, and of course, dividend payouts.

Many people tend to underestimate the power of dividends. If the price of a stock decreases, you still earn dividends per share (if you are a shareholder). If you are a long-term investor, don’t worry about the current stock price. Think of the income you earned by just holding the stock.

Believe In Time

If you’re investing in well-established companies with a history of being great investments even in bear markets, have faith. Be sure that their business should be okay, whatever the market situation is.