Should I invest in a rising stock market?
The rising stock market has been at an all-time high for quite some time now. There have been over 870 new highs in the US market over the last three decades. For the majority of this time, the market traded within a 5% range of the high prices. The year 2021 witnessed over 50 new highs in the stock market. However, this in no way means that this is the first time that the US stock market is seeing so many new highs in a single year. In the past few years, the US stock market has seen several highs and lows altogether, and this article will help you decide if now is the right time to invest in the stock market.
Prefer the time you are considering to invest in the market rather than the timing of the market
The market timing enables you to focus mainly on the best time to buy and sell. This plays a minor role if you want to enter the market for the long term. When you put in an investment and hold it for over a year, there is hardly a time that is not a ‘good time.’ The FTSE world index also shows that there have only been 15 months in the last ten years that would not have performed the same way as the other months. This proves that when you are looking at stocks from a long-term perspective, there is less to worry about the market timing.
If you focus too much on perfecting your stock purchases by timing the market, it could actually lower your profits. Waiting to invest at a lower price could drive a strong market return away from you instead of reaping significant profits.
Economic stability and recessionary periods matter more.
You should be concerned about entering the equity market when there is a prolonged price decline in stocks. The decline is such that the prices fall by 20 per cent or more from the recent high swing. Such bearish movements in the market are generally caused by a recessionary economic phase resulting from the US Federal Reserve increasing its interest rates. The 2020 economic recession lasted over two months and is considered an exception in the history of recessions for lasting for much less time.
Even though the US stock market’s value dates back to its long and robust history, its current low-interest rates have continued providing significant support. You cannot use valuations to time the stock market either, as the stock markets are often over and undervalued for various reasons.
Since there is no fear in the US economy of a further recession, the bond purchase price is also going to come down by the Fed. This does not mean that interest rates will rise any time soon, but there are still investment opportunities that one should put their finger on.
Don’t miss out on the existing opportunities.
The equity markets are certainly going to provide the best level of access and returns with exciting investment themes and new emerging companies being listed in the exchange. There will also be considerable opportunities in the investments related to ESGs, like cyber security, clean energy, robotics, sustainable food production, environmental protection, and so much more. These investments can only be accessed in the US stock market, and they have massive potential in terms of long-term profits. Hence, these are the opportunities that should not be missed, and even though we are seeing a rising stock market right now, this is when you invest your hard-earned money and forget it for a few years. A few years down the lane, the prices of these stocks will see a minimum 100% jump in pricing, helping you earn double what you invested.
Major stock market indices have witnessed sufficient gains in the last few months, and the picture is expected to continue the same way. All the three major indices, Dow Jones Industrial Average, Nasdaq Composite and S&P 500, have increased both in terms of daily percentage change and daily point change. The markets are considered healthy and reflect an investor’s optimism and faith in the economy, with earnings and economic recovery at the core of the stock market performance.
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