Should I Buy Stocks Now or Wait? Experts Weigh In

While stock market investors have been seeing red for a large part of 2022, Tuesday was an exceptionally bad day. The Consumer Price Index report published early Tuesday morning showed inflation is still on the rise despite the Federal Reserve continuing to raise interest rates.

According to Investor’s Business Daily, this led the stock market to plunge to its worst one-day loss since June 2020, with total losses of over $1 trillion dollars. But does that mean you should run to your brokerage account and buy more shares of your favorite companies? Or would the better strategy be to pull everything out and avoid more losses?

Below, Select details how everyday investors should be thinking about their investing strategies.

2022 has been an especially frustrating year for investors, which followed 2021’s roaring bull market.

Nearly all major indices and many individual stocks are suffering double-digit year-to-date losses, leaving many hesitant to put more money into the already bleeding stock market.

A Bankrate survey from May 2022 indicated 56% of U.S. investors said they had purposely not made any investments due to stock market volatility. But now that inflation isn’t slowing down and markets are continuing to sell off, investors may be even more reluctant to put their money to work.

If you’re already investing or want to begin your journey, consider the following two points:

This may not be the bottom

JD Gardner, founder of Aptus Capital Advisors, says this is likely not the bottom of the market, which leaves a great opportunity for investors to put their money in when stocks are on sale and ride the wave of growth back up to the top.

With that in mind, several studies have shown that “time in the market” was much more favorable than the idea of simply “timing the market.” In other words, waiting for the market to fall and predicting its rise isn’t really the best strategy. Putting your money to work in proven investments and giving it time to work for you is the best way to go about it.

Before you try to predict what the stock market will do, try and dollar-cost average your way into the market so you can keep your average spending down — and your hopes high — for solid returns.

Consider investing in index funds that track the overall stock market or S&P 500, this way your not relying on the performance of an individual company. Funds that track the broader market have proven to be good choices if you have a long term investing horizon.

Focus on what you can control

The stock market will have its good days and bad days, and the only things in your control are your financial goals and the strategy you’re employing to reach them.

Tara Falcone, chartered financial analyst, certified financial planner and founder of the goals-based investing app Reason says there’s little reason to worry just yet. “If you’re investing for a long-term goal like retirement that’s decades away, you probably don’t need to sweat this downturn.”

That said, if you have a short-term goal, such as buying a home, Falcone urges investors to “assess whether the investments you’ve earmarked for that goal are [on target].” If they aren’t, it may be time to adjust your investing strategy.

A 401(k) is an employer-sponsored retirement account that lets you put money away tax-deferred — in other words, you won’t have to worry about paying taxes until it’s time to take the money out. In some cases, you might also be able to score free money through an employer match if your company offers it.

You can also opt to open an IRA, or an individual retirement account, on your own, whether or not your employer offers a 401(k) plan. A traditional IRA gives you the opportunity to contribute pre-tax dollars, while a Roth IRA allows you to invest post-tax dollars.

I elected to contribute to both a 401(k) and a Roth IRA to take advantage of tax deferment with the former and tax-free growth with the latter. The best combination will be unique to your financial needs, so consider your tax bracket and retirement goals before you begin investing. For more information about opening a traditional or Roth IRA, check out some of our favorite IRA brokerages:

Taxable brokerage accounts

A taxable brokerage account is different from a 401(k) or IRA because you can deposit and withdraw money to and from it as often as you like without incurring a penalty. This makes them a great place to put money away for retirement or toward another goal, such as buying a home.

Keep in mind, however, that investing in tax-advantaged accounts — such as a Health Savings Account, 401(k) or IRA — first may be a better strategy to help reduce your overall taxable income.

If you prefer to have some flexibility in how your money will be invested, consider working with one of these brokerages or robo-advisors as you continue on your investing journey: