Buy low, sell high.
It seems like sound logic, right?
The cheaper you get something and the more expensive you sell something for, the more money you make.
But it doesn’t work in investing quite like that.
The theory does, of course — but not the execution of that theory.
Over on Quora, I was asked a question dealing with just that idea …
This question gets two things right …
- it’s worth investing in low-cost index funds, like those from Vanguard
- you shouldn’t invest in the stock market unless you have a long-term outlook
But here’s why I answered an emphatic no to the idea of waiting until a recession hits.
Don’t Wait for a Recession. Here’s Why.
No.
Start investing now.
It doesn’t matter if the economy is good or the economy is bad.
By investing now now in low-cost index funds, you’re investing for the future.
We can’t predict the future, but we do know two things:
- No one has any concrete knowledge of a particular day/week/month where the stock market is going to be down enough that it’s “hit bottom” and you should buy.
- Over the course of its existence, the US stock market has continued to grow and provide wealth to Americans investing in the economy.
Think about this.
On September 16, 2008, I tweeted this:
That day, the stock market closed at 11,059.02.
The economy was falling apart.
People were losing jobs left and right (I lost mine in early 2009).
No one knew if we were at rock bottom (we weren’t).
I had people reach out to me and say it was a bad idea to encourage investing in the stock market at that point.
Really. They said that things were really bad … why invest in the economy?
I was buying; you see, I’m an automatic investor. I don’t time the market — I buy automatically on pre-determined dates with pre-determined amounts of money.
Two months later, the stock market was down to 7,552.29.
I continued to buy. Because I don’t time the market.
On March 6, 2009, the market hit its bottom at 6,443.27.
I continued to buy. Because I don’t time the market.
Today, the Dow Jones Industrial average is over 24,000.
And guess whose investments have been growing this whole time?
That’s right.
Now look …
I know you may read this and say, “Well, obviously I should wait until the economy crashes to buy … that’s what you just gloated about!”
No. That’s not the point.
The point is that through good times (now) and bad times (then), investing in the economy has always been a good, long-term decision to make.
I invested before the stock market crash (when it was in the 14,000s), when it was crashing, and at the bottom.
All of those purchases I made have grown exponentially today because, in the long-term, the economy continues to grow.
That’s why you shouldn’t wait to invest.
Just do it.
Photo by Aron Visuals on Unsplash
