We’re starting off this post with the question that’s on everyone’s mind: Should you wait before investing (or investing more) given the uncertainty of the economy? In one way or another, all my clients are asking this totally reasonable, million-dollar question. It reminds me of when we wrote about this topic in April of 2020 (remember that time in our lives?). 

So, should I Buy Stocks Now or Wait?

While this is the main question we’re all trying to answer, it comes with a host of other common questions: 

• Should I keep going with my investment plan? 
• Should I add money into my investments? 
• What if I put money into the stock market now and then I lose some very quickly? 
• What if the economy goes into recession? Shouldn’t I wait to invest until we know what will happen in the economy?

Here’s the quick answer: In times of crises, our human impulse is to “wait things out” until danger passes. Why try to catch a falling knife, as they say?  Even though this logic has saved us in the past, it’s not always the best impulse to follow for long-term investing. 

Assess Your Comfort Level with Risk

If you’re concerned about whether now is a good time to invest: Do you need this money for anything in the near future, i.e. within the next one to three years? If you can reasonably assume that you do not, then you can have confidence moving forward with your investment plan. 

A big part of investing is getting familiar with your own comfort level around risk, particularly when the markets are down. This is probably the hardest part of investing, especially for new investors. To help ease the pain, first try to understand what your comfort levels are. Ask yourself, “If my account were to fall by X amount of dollars, would I be okay or not okay?” Based on that assessment, you can craft a strategy of how much of your money can be in stocks, bonds, real estate, or whatever you are investing in. And stick to it. 

Reasons to “Stay the Course”

Here are some of the compelling reasons for why I think you should “stay the course” with your investment plan even through the down market. 

Expected returns for the future are going up. 

When markets decline precipitously, the outlook for future returns goes up. See this latest piece from Vanguard for evidence of and further thinking regarding future returns. While this might not make you feel better in the short term, it can give you more confidence about your long-term plan.

History (and the data) is on your side.

As we all know, in a given year the chances that the stock market will go up is a coin toss. In a two or three year time frame, it’s the same probability. But when you stretch the time period to say, 20 years, the probability that you will make money in stocks is nearly 100%. Looking at the data a little differently: In the period of time after a recession, stocks are almost always up (remember, you won’t know when the recession ends until after it’s already happened!).

It’s impossible to time the recession (and the stock market)  

… and besides, you don’t have to!  You will exhaust yourself if you try to figure out what the economy or stock market will do. Waiting for the “right time” also is not a winning strategy; you will never guess that correctly either. You may even be wrong (and often will be in the short term), and that is okay as long as you have the timeframe to see it all through.  

There will always be uncertainty and you can’t control it. 

Letting this latest bout of uncertainty deter you from investing is not the best approach. We might be at war, we might be in a recession, we might be going through a pandemic; there is always going to be something making us question our decisions regarding our investment plan. It’s never going to feel like a sure bet. That is part of the investing game.

Read More on Creating an Investment Plan by Tuning Out the Noise

“Compromises” to Boost Your Confidence

Given the case I lay out here, let’s look at some “compromises” that we can use as tools to help make you more confident and keep you investing.

First, for whatever investments you do have, stay invested. This is 75% of the battle. If you feel comfortable enough to add some more money, you can take two alternative approaches: Either invest a lump sum or “dollar cost average” your investment out over a period of time. 

While data supports lump sum investing as the best approach, I would offer an alternative framing: Do whichever won’t make you regret the process—assuming that you do get your timing wrong. Since the most successful investment strategy is staying invested, anything we can do to help make the experience less unpleasant is a good thing in my book.