Tuesday, April 28, 2009

Should I be in the stock market?

One of the most talked about issues in our current economic environment is the utter collapse of the stock market, taking along with it the retirement funds of millions of Americans. Being a 27 year old, a relatively new player to the market, I have to ask the question: Should I be putting my money into the stock market still? Im going with a resounding HELL YES.

Unfortunately I have to start off with a history lesson. There have been multiple times in US history where we have had recessions, and consequently the stock market has taken a dump. One thing holds constant however: the market ALWAYS recovers. It has to, otherwise we have bigger problems to worry about than money. You might be saying, well this time could be different. That is what people say EVERY TIME there is a recession. Granted this one is proving to be more than your garden variety recession, but its still nowhere near great depression level, and guess what: the market recovered then too!

This is the best time (i will reiterate best time) to get into the market, while you can buy everything at a discount. The market tanked so far and so fast because everyone panicked the market is way undervalued. Its the opposite effect of how we drove the prices way up to begin with. We just need to find the middle ground somewhere and build from there. You can already see signs that people are beginning to feel the same way, due to the surge of financial stocks in March. People realized these stocks were worth well more than what they were listed at, and that caused a surge in their prices. I got in right before the surge, and have done relatively well for the small amounts ive been able to get in.

You have to look at it from a common sense standpoint. How are all of these stocks, in every different area, down well over half of their highest values? Did we just not make any money as a country over the last 25 years? I say this because current market levels are telling us that we have lost generations worth of investment gains. That makes zero sense. The world is bigger and better than it was back then.

It all comes back to fear. We are taught in finance class (which I attended every once in awhile in college) not to freak out and sell everything when there is a downturn in the market. It is a common occurance in the business cycle. Its turning out that that is just what many uninformed Americans have done, causing prices in the market to plummet. Its going to be those few "brave" (I put brave in quotes because those brave people are just using common sense) investors who end up being the winners in the market when it does turn around. Is it going to be you?

Maybe the swine flu will get you and you wont have to worry about it!

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