I reckon it’s a good time to begin investing in the stock market.
To me, it looks like the market is beginning to emerge from a long period of depression. Investor sentiment has been low and some businesses have been struggling because of economic and geopolitical headwinds.
However, even though valuations have been marked down by the market, lots of enterprises have actually been trading well.
The market looks ahead
And when these robust business have posted their trading results in recent weeks and months, often their stock prices have jumped higher. It seems that the market has been surprised by how well some companies have been doing.
But that’s not always the case. Sometimes company results have disappointed and their share prices have fallen on results day.
Conditions are not perfect and not every business is thriving right now. But many are. So there’s opportunity now to find decent businesses trading on the stock market at suppressed valuations.
Meanwhile, it’s well known that bull markets tend to follow bear markets. And we’ve just endured a prolonged bear market for stocks and shares.
However, it’s easy to argue that the world looks like a scary place. And economic challenges abound. Nevertheless, the stock market tends to move ahead of events on the ground. So, we are likely to see stock prices moving now in an effort to try to anticipate what the economic and geopolitical landscape may look like in, say, six to nine months’ time.
I’d ask myself the rhetorical question, what will the general environment look like for businesses in early 2024?
And after considering that question, I’d invest accordingly right now.
Risks and opportunities
Stock market investing always involves embracing risks as well as opportunities. And conditions will never be perfect for beginning. But to my reading of the situation, things are as good as they are likely to ever become, right now.
However, it’s important for any investor to embrace the concept of continual professional development. Carrying out ongoing research and learning is essential to success.
Nonetheless, I’d dive straight in by putting some real money at risk in the markets, even if it’s a small amount. There’s nothing quite like the way that having some skin in the game can accelerate the learning process.
And, on top of that, there’s a good chance we are seeing a once-in-a-decade opportunity in the stock market right now.
So, to begin with, I’d perhaps aim to put regular monthly contributions into some low-cost mechanically managed index tracker funds.
And I’d make those monthly investments while building up knowledge and carrying out my ongoing research into businesses and investment strategies.
After that, I’d maybe aim to include a few select investment trusts in my portfolio. Like trackers, these can offer diversification over many underlying businesses but with the possibility of outperforming a tracker fund over time.
Caution and research is required because many trusts and managed funds actually look like ‘closet’ trackers, only with more expensive ongoing fees. However, there are a few gems out there.
Finally, with my experience accumulating, I’d aim to invest in a few carefully researched stocks and shares representing individual companies. And, although positive outcomes are never certain, my aim would be to achieve higher returns than the general market over time.
