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Is Now the Time to Buy Stocks?
- aneesh 18y agoI'm probably paraphrasing someone here, but ... by the time you start seeing articles like this, chances are you're late already.
- peter123 18y agoi think if you invest for the long term (3 yrs or more), a lot of stocks are still undervalued at this point... and they continue to fall as we speak.
- aneesh 18y agoWhich is what confuses me. How can there be a consensus that something is undervalued over a period of time ... wouldn't the markets just correct the price quickly?
- tomsaffell 18y ago>by the time you start seeing articles like this, chances are you're late already I disagree on two counts: 1. The market has seen no significant net increase in price, and is down significantly on recent (12 month) highs. So one may be early for this cycle (or at bottom). Alternatively, one may be late in the sense that there will be no further investment opportunities ever in the future, and that one would have needed to invest during a previous cycle:) (This is see as evidence that it is not too late) 2. Markets act on fear and greed. As Buffett said, be "be greedy when others are fearful". Sentiment changes slowly, and heterogeneously (by which I mean different investors change their sentiment at different times and speeds). My observation is that most people are still fearful, but some are not, and the author of this article (and Buffett) are two such examples. So the logic "one person calls 'buy' -> no opportunity" does not hold for me. Now, if many (>=50%) are calling 'buy' then it is time to be fearful.. (This I see as rationale for why your statement isn't true, but not evidence)
- alecco 18y agoNot for me. When this kind of crisis hit a bottom it plateaus there for a while and doesn't suddenly spike up 30%. In fact, in that graph the top curve follows the bottom curve, except the last bit. Based on that they should predict dividends will collapse soon dramatically. They either didn't base their argument well or are completely delusional and can't read their own graphs. And this current crisis is all about prediction based on past data can be plain wrong. See: http://news.ycombinator.com/item?id=360412 http://news.ycombinator.com/item?id=360412 The End of Wall Street (HN main page today. Beware it is very long!)
- fauigerzigerk 18y agoOh the market does spike. Just look at the recent month. You just don't know in which direction and whether a further leg down is in the cards. At the end of the day market timing is a game that makes the end of your day come so much quicker, and I'm asking myself, what have I achieved in terms of innovation? Unless you do it algorithmically, it's incredibly boring, but once you have started it's hard to stop. Market timing is an addiction :-|
- jmtame 18y agoAnswer: No.
- david927 18y agoIf lotteries are a tax on those who don't understand odds, buying in the current market would be a tax on those who don't understand what's happening.
- metaguri 18y agothe point isn't that we've necessarily hit the bottom. if you look at the dividend/price chart, we're probably heading into a big "hill" just like some of the early ones (we've only begun to swing up. the point is that things are relatively cheap where we stand today. they may get cheaper, but they may not. look at your downside risk (missing 25% of a bigger bottom) vs. upside risk (we've already hit bottom). or, if your nicholas nassim taleb, you think that you'd be crazy to make any decision based on the graph, because tomorrow everything could go to zero, and you'd be broke. i'm thinking of shifting part of my portfolio to stocks. but given volatility, like the article says, it's going to be a small segment, and i can allocate more as it goes up. but i'm investing in the long term, and if the S&P goes to 0 then i won't be worrying about money. i'll probably be worrying about people trying to break into my house and steal my cans of campbell's.
- siculars 18y agoyes, yes, yes. stocks with dividends. stocks that have been crushed. big name companies that have been around for a long time and will continue to be. appreciate your downside risk against your upside potential. if you fear the market will go to zero than we will all have much bigger problems than counting our returns. if you have any faith in the american model than you must conclude that this too shall pass.
- alecco 18y agoLike GM?
- Retric 18y agoI am not saying you should buy GM but if a 3rd party where to get interested and do a leveraged buyout they could make a lot of money or if the government does a big bailout you could make a lot of money etc. The real problem with GM is they are not making money today so they might not continue to be. PS: Options on GM stock could be a good investment of you are willing to take a lot of risk.
- tomsaffell 18y agoI fear I may be breaking with etiquette here, so please let me know if I am, and then I will remove this comment.. I did an analysis of this recently, available at: http://saffell.wordpress.com/ http://saffell.wordpress.com/ My conclusions: 1. Now is a better time (on average) to make a 5-10 year investment than a random point in time is. 2. For 20-30 year investments, the recent fall in prices make little difference to returns over such a long period. This is all based on historic data (from 1871 to 2008), which, as we all know, is no guarantee of future performance..
- davidw 18y agoWhat would be breaking with etiquette about your post? Unless you ripped off the data in your blog post or something, it's informative, interesting and polite.
- vaksel 18y agoa lot of people don't like "blog spam" so it gets looked down on, not saying this is, but to many people the common idea is that if you see it on a blog, its just copy pasta from a legit source.
- davidw 18y agoIf people post links to things they've taken the time to write themselves, I'm more than happy to see them. By all appearances, this is something he did himself.
- tomsaffell 18y agoThanks for saying that. Some may consider it linkjacking, especially since I posted this once before on HN (a few weeks ago) when i first wrote it The work is all original.
- Retric 18y agoThanks, that's about what I was expecting. I was wondering where you got the data, does it include inflation, and how does it include dividends? PS: I keep wondering what all those baby boomers taking money out of 401k's to retire with is going to do to the market.
- 13ren 18y agoAccording to Warren Buffett, don't buy a stock, buy a (part of a) business: Find a good business to buy. If the price is right, buy it. It's like buying anything, really. In a market where all stock prices have fallen dramatically, you'll be able to buy it cheaper than before - but note, it might still be too expensive. The trick is in recognizing a good business and valuing it - but that's much more doable than deciding whether to "buy stocks", because it's more definite and specific. To put it in perspective: it's what ycombinator does.
- eleitl 18y agoWarren Buffett (assuming his performance is not due to chance) buys things he understands. He also has deep pockets. For normal investors, in ordinary times one should pick up an index fund (roughly one third of your total investments, the rest of them are not stocks) and hold unto them until you retire. The formula can be bend slightly depending how far you are from retirement. Of course these are not ordinary times.
- tyn 18y agoAs I have pointed out before, "deep pockets" is actually a disadvantage
- netcan 18y agoWhen they're that deep it is. But enough to buy a controlling stake in mid sized companies, that not. Happy middle's where you want to be.
- 13ren 18y agoYes. Warren Buffett has gone on record saying that if he only had a million dollars to invest (as opposed to umpty billion dollars), he was sure he could double it in a year. His problem is that there just aren't that many multi-billion dollar investments around, and those that are, are well known, and therefore accurately priced. Maybe also, for the same reason, it's hard for a massive company to keep growing (a smaller co has more room to grow). With a million or less, he could assess the small companies that aren't covered by analysts and so on, to find one that was (1) great (2) cheap The lack of money is not the deficit that stops you (and me). Mostly, it's effort, and self-confidence in your own considered opinion when it is contrary to everybody else. To buy when others sell - because you've done the research, and trust your judgment. It's mostly an emotional or moral quality. If your judgment is wrong, you have a lovely learning experience that cannot be obtained in any other way (and Warren Buffett has had that experience).
- eleitl 18y agoWhy does his graph start with 1945, and not, say, with 1890?
- TweedHeads 18y agoAAPL and YHOO Both are cheap, both will double in a year. Mark my words.
- cosmo7 18y agoToss a coin; it will be heads. I guarantee it.
- timae 18y agoAnswer: Yes. Now is probably the best buying opportunity in your lifetime (assuming you're 18-30). Buy the fear, sell the greed!