Should You Really Invest in the Stock Market Right Now? History Offers a Clear Answer
Alex Smith
3 hours ago
Whenever markets get volatile and the stock market starts to sell off, itâs natural to wonder if now is really a good time to invest.
And right now, with the war in Iran creating a tonne of uncertainty, oil prices spiking, and global markets reacting, itâs easy to think, well, maybe itâs better to just wait things out.
Maybe the market will drop more and things will continue to escalate, which will create a better entry point just around the corner. Thatâs how most investors start thinking in environments like this.
But the problem is that line of thinking almost always leads to doing nothing. And historically, thatâs been one of the biggest mistakes investors make.
Why uncertainty always feels worse in the moment
Every time a significant global event like this occurs, it feels different.
Today, itâs geopolitical risk, disrupted oil supplies, and rising inflation concerns tied to the Iran war. But before that, we went through the same thing with sky-high inflation, rising interest rates and the pandemic. Thatâs all occurred in just the last six years.
So, there will always be something causing uncertainty to creep in or volatility to rise.
And in the moment, it always seems to feel like this time might actually be worse.
Thatâs what makes investing difficult, especially from an emotional standpoint. Because even if you understand how important long-term investing is, itâs still hard to ignore whatâs happening right in front of you.
What actually matters for long-term investors
The key point most investors lose sight of during volatile periods is what theyâre actually buying. When you invest in the stock market, youâre not just buying a price; youâre buying a business.
And in most cases, especially when you focus on high-quality companies, that business doesnât suddenly change just because oil prices move or because thereâs geopolitical tension.
If a company had strong operations, growing earnings, and compelling long-term potential before the uncertainty and volatility ticked higher, thatâs almost always still true even amongst all the headlines.
So, although stock prices can move significantly in these environments, when you find that high-quality stocks with the same operations have the long-term growth potential they had before, thatâs where the best opportunities come from.
Why trying to wait for the stock market to stabilize rarely works
Itâs tempting to think you can just wait for the war to settle and markets to stabilize. However, that clarity will only come in hindsight.
Furthermore, markets often donât wait for clarity. In fact, they usually move before things feel better. By the time the situation improves and the headlines calm down, many stocks have often already recovered.
Thatâs why so many investors miss the rebound, waiting to be sure that the uncertainty is subsiding. By then, the opportunity will almost certainly be gone.
Thatâs why taking a long-term approach to investing and managing your emotions is so important.
If youâre investing for years or decades and youâre focused on finding the highest-quality and most reliable businesses to own, then short-term events like geopolitical conflicts end up mattering far less than they feel like they do in the moment.
In fact, these opportunities, if you act quickly and decisively, can be the best buying opportunities.
History has shown us this time and again. If you look back over time, investors have faced this same situation over and over again. Whether itâs a war, a recession, a pandemic or some other black swan event, the market always comes back stronger, led by the highest-quality companies in the economy.
Even one of the safest stocks on the TSX, like Fortis, declined by over 25% in the initial pandemic selloff. And since bottoming out, it has earned investors a total return of more than 125% in just six short years.
Thatâs why, over the long haul, owning high-quality businesses has consistently shown to be one of the best ways to build wealth.
So, if youâre wondering whether to invest in the stock market today, the answer is yes, as long as youâre focused on buying the highest quality companies and committed to owning them for the long haul.
The post Should You Really Invest in the Stock Market Right Now? History Offers a Clear Answer appeared first on The Motley Fool Canada.
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More reading
- What Are 2 Great Tech Stocks to Buy Right Now?
- 1 Canadian Energy Stock Quietly Positioning for a Big Year
- 3 Canadian ETFs to Buy and Hold Forever in Your TFSA
- A Magnificent Dividend Stock That I’m “Never” Selling
- 3 TSX Dividend Stocks Yielding Up to 6% â and Each Can Back It Up
Fool contributor Daniel Da Costa has no position in any of the stocks mentioned. The Motley Fool recommends Fortis. The Motley Fool has a disclosure policy.
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