When Should You Buy Into The Stock Market? Like Yesterday.

by Silicon Valley Blogger on 2008-06-2022

I’ve got this former co-worker who absolutely refuses to buy into the stock market. He says it’s like playing the lottery or gambling. And no matter what kind of justifications I make, he won’t listen — instead, he’s content with putting his money into real estate property in his native country. His investments have yielded him significant returns in recent years, so it may be hard to argue with him about it.

However, this just emphasizes yet one more truism about investing:

Invest in what you know best and what you’re most comfortable with.

Though many of us don’t necessarily begin our investing lives as experts on things we’ve invested in, the point here is that we do enough due diligence on matters that put our money at some risk.

Thus, if you’re open to the idea of investing in the stock market (like most people actually are 😉 ) but are somehow still on the fence about it, maybe some of the following thoughts will help you take the dip into a few investments that should grow at a greater pace than your staid FDIC insured savings account, over the long term.

invest in the stock market
Photo by thinkpanama

The Best Time To Get Into The Stock Market?

A lot of people I know ask me about when they should start investing in the market. My quick answer to them is “Buy now!”, but that really deserves a bit more explanation. Here’s what I really mean: when somebody asks me “When should I buy into equities?” I ask them to zero in on these 8 indicators that could tell them they’re ready to wade into stocks:

When you’re comfortable about it.

Don’t jump into the market unless you’re really comfortable with the inherent risk it offers. Because of the relatively higher returns that stocks give you, the risk to your capital is also greater. Of course, there is other risk involved if you do NOT invest in the market, like the risk that your money won’t be keeping up with inflation. By diversifying your portfolio and maintaining a long term investment horizon, you’ll manage your risk of capital loss much better.

Like, yesterday!

Most personal finance buffs will tell you that you should invest early or as soon as possible. I’ll take it further and say you should have started investing yesterday — and it’s obvious why. A while back, the stock market was a lot lower than it is now. Not in the near term of course, but look far enough in the past and you’ll see how it’s climbed. If you had invested yesterday, you’d be sitting on some profits. This is the case even as the market has dipped so many times over the years: the market’s long term trend is still UP.

When the market has slumped.

Most folks I know get quite excited when the market is marching upwards — that’s when they ask the usual questions about what type of stock to get into or what fund is worth checking out. It’s the herd mentality at work, and when stocks are strong and market momentum is fierce, we can’t help but be swept in it. But what about those times when the market is in the dumps? If you’ve got the funds, entering the market during a correction or bearish period may yield you good value for your money, especially when you take the long view. Taking the contrarian approach can yield you bigger returns down the road since big downtrends are usually followed by even bigger rallies.

When all you hear is bad news.

As they say, buy when there’s blood on the streets. This is simply a corollary to the “rule” that states that you should consider buying when the market is down. I get particularly excited when people are selling and bad news is circulating everywhere, thereby exerting downward pressure on the markets. So contrary to what you may think, bad news is really good news….for buyers and investors!

When you stumble unto a windfall.

Okay so how many of us can admit to spending a windfall before we actually ever receive it? Have you tried mentally accounting for a windfall, and assigning it to an expense bucket before you’ve even gotten a chance to touch it? Unfortunately, it happens too often especially these days when cash flow is tight and everyday costs are up. But if we change our habits and place any unexpected extra money (such as an inheritance, cash gift, tax refund or even the remote possibility of a lottery win) into the stock market instead, that money will leave you a much bigger impression later on than if you simply spent it. Windfall + stock market + power of compounding = potentially big profits later.

After you’ve got a handle on your debts.

Having a lot of debt can be pretty distracting and overwhelming, so let it be the focus of your financial life. That is, if you’re heavy with bad debt — the kind that only takes away and doesn’t give anything back — then make it your priority to reduce it as much as you are able. Once you’ve got your loans under control, you may start considering an investment plan, especially if you’re eligible for an employee-sponsored retirement account. Personally, before I do much else financially, I’d make sure that I trim all my big, bad debts.

After you build your emergency fund.

As priorities go, trimming huge bad debts and building an emergency fund should be first on your list before you begin worrying about an investment program. Working on a lot of financial goals is always quite commendable, but sometimes, doing too much can also backfire. By spreading yourself thin, you may get frustrated and make less progress than if you prioritize and handle your most pressing concerns first prior to putting your hard-earned cash at risk in the markets. But if you’ve got the money and the bandwidth — by all means, tackle all your money goals simultaneously!

Every month.

It’s a financial golden rule that is worth repeating often: invest every month. Even just a little bit. And funneling your funds in the stock market will help build your net worth faster than if those funds were in more conservative accounts. Apply a dollar cost averaging or value cost averaging strategy and you’ll be amazed at how large a nest egg you’ll be able to build.


If you’ve checked off the list above, then you and your money are ready to roll. Happy investing!

Copyright © 2008 The Digerati Life. All Rights Reserved.

{ 18 comments… read them below or add one }

John June 21, 2008 at 9:20 am

You need to invest in things you understand. Getting into things you’re not familiar with can lead to disaster. I know because I’m a builder and see a lot of would be investors who think that they’ll make a quick buck buying up homes. It ain’t pretty right now.

Silicon Valley Blogger June 21, 2008 at 11:10 am

The stock market is quite different from the property market in that you don’t have to commit a massive amount of money by investing in stocks right away. So there’s a need to time things a bit when you buy properties for investment purposes IMO, unless you plan to be a landlord/lady for the long term and you’re doing it for cash flow…

I agree that it’s tough to be a property flipper these days — unless someone out there can say otherwise. I’m pretty curious about how it’s going for real estate investors right now, actually.

For stock market investors, it’s status quo for the most part.

Bob June 21, 2008 at 3:21 pm

You are right most people buy just as the market tops out and starts a down trend and then they sell and lose money. The market is not a get rich quick process! While some people may have made money this way it is not the norm.
That hot tip that a friend of a friend of a friend told you about is old news when you hear about it, the price has already been driven up before you buy.
Watch Jim Cramer’s (Mad Money) and track the stocks he mentions on his show the next day, they all have a run up or down depending on what he said about them.

I also agree with buy what you know.
Do you drink Pepsi, Gator Aid, or Aquafina? Do you eat Frito’s, Doritos, or Lay’s potato chips? Do you eat Life cereal or Rice-A-Roni?
All of the above products are owned by PepsiCo (PEP)

How about Frosted Flakes, Special K, Rice Krispies, Pop-Tarts, Eggo waffles, or Nutri-Grain cereal bars?
All of the above products are owned by Kellogg’s (K)

When you do home improvements do you go to Home Depot (HD) or Lowes (LOW)?

These 4 companies are just an example of hundreds of companies that offer Direct Stock Purchase Plans. You can buy direct with out a broker the fees are either low or the company pays the fees in some cases. I know that (PEP) and (K) pay all fees after you are set up and you can invest as little as $50 with (PEP) and $25 with (K) after your first time purchase. I think most of us could swing that amount with out breaking the budget.
I have almost 200 companies listed on my site that offer DSPP feel free to check it out.

Too Close To The Sun June 21, 2008 at 10:30 pm

Unless you have insider knowledge, it really only makes sense to buy index funds. And market timing doesn’t work – it’s just gambling. There is no way that you can be smarter in the long run than the market as a whole (although 50% of the time you can do better).

I’m hoping to convince my spouse to take the same approach with currencies since the dollar seems mighty precarious at the moment. A diversified basket of currencies seems like just the ticket.

Goran web design June 22, 2008 at 3:56 am

Its the time for gold bullion rather then shares, or thats what I have been doing and what an increase over the last year and its portable. We will leave the stocks to the experts.

Kray June 23, 2008 at 12:48 am

The stock market is very complex and to leave it to the experts.. that left me thinking. We should also take the step to understand it or at least, have the experts advise us so we can weigh whether we are ready for it or not. As with gold bullions, I heard it is one lucrative way of investing and the risk is not as great.

fathersez June 23, 2008 at 4:47 am

My two elder girls will be starting their first jobs soon. Once the issues of settling down, (they both got their jobs in the capital and we stay 60 kms away), etc are finished, it will be time to talk to them about investing.

Both have some mutual funds in their names now. I have to talk to them to continue.

Your post will come in handy when that time comes.

Proxy June 23, 2008 at 8:11 am

The stock market is so complex that you might just burn your fingers if you’re not careful enough.

Allese June 23, 2008 at 1:44 pm

What would you recommend for one who barely knows any thing about the stock market/investing? I recently graduated from CAL with a liberal arts degree and have my first full time job and want to start investing but have no clue where to start. The whole thing seems completely overhwhelming to me. I have talked to a lot of other people my age that feel the same. This is probably another major reason young people don’t get involved.

I would warmly welcome any suggestions; I do genuinely want to learn.

Silicon Valley Blogger June 23, 2008 at 2:23 pm

Hi Allese!

I was hoping to meet you at the Blog Her conference actually, but I’m having some issues with my schedule currently. 🙂

We have a few things in common too it seems (I’m a CAL alumnus too).

Regarding your question — I’d strongly recommend you check out some great mutual fund sites like Vanguard (at http://www.vanguard.com) or T.Rowe Price ( http://www.troweprice.com) or Fidelity (http://www.fidelity.com). They usually have an area there that provides resources to investors. There may also be a section for beginning investors.

Or you can check out Fool.com’s Investing section.

Here’s how I started investing after graduating from college:

1. Opened a money market fund account with a mutual fund company. I placed my savings in there instead of a checking or bank savings account. The MMF gave me a better interest rate though it’s not FDIC insured.

2. I studied mutual funds for a bit. Ultimately I started to dollar cost average from the MMF into a stock market index fund that tracks the S & P. The mutual fund companies can help you set up an automatic savings/investment program so you can fund your investment account gradually — on a monthly basis. If you give them a call, a representative may be able to help you!

3. You will need to fill up some forms online or offline to set up the accounts and the savings program. The forms ask how you will fund your account and so you can identify either a checking account or some other fund as the source of your monthly investments, which can be as low as $50 a month I believe!

That should be the gist of it! It’s up to you how much you’d like to start with. If you cannot afford a monthly program, that’s okay — just opening up an account and buying the right type of investment is a great start. Later on, you can add more to your account or set up that regular investment program when you are more comfortable.

Again, I’d strongly suggest an index fund — one that tracks the US total stock market or the S & P. Later on you can diversify into international index funds as well!

For more info, you can check out my Investment category on this site as I cover a lot about how to start investment programs/plans and just general tips.

Thanks so much for your comment! 🙂

Eric J. Nisall June 25, 2008 at 1:36 pm

This is a very good post, similar to one which I wrote about back in May, and I absolutely agree with many of the points. The main one being that people should invest in companies they know. Obviously if you are brand-loyal, have a long history with the products and/or services and are very confident in remaining loyal then that is one company you can consider investing in as long as you also do research into the financials as well. It’s not about looking for the newest and hottest trend, but stability and being comfortable owning the stock of a particular company.

I also agree that you should invest early, particularly in the case of the buy-and-hold investor who is partial to dividend-paying stocks. This way, you not only have the dividends working for you, but you also have the power of compounding over time working for your benefit as well.

Jay June 25, 2008 at 11:09 pm

Wow, some good advice from the Silicon valley investor. This is the long slow road which is much safer and will get you there. However I believe in at least having a small portion of your portfolio in high risk/ micro cap or bulletin board stocks. After all your homerun odds are 1000% better, they are better odds then the Lottery or race track. If you do lose some or all of your money…at least its tax deductible!

Eric J. Nisall June 26, 2008 at 5:30 am

Jay, be very careful. The deduction you take on Schedule D from capital losses is limited to $3,000 a year. Anything more must be carried forward to future years until the loss deduction is wiped out.

Rob Bennett July 2, 2008 at 1:30 pm

The comment that it is good to buy low is a good one. People certainly should not be upset by price drops. Price drops are good for the long-term investor.

However, I don’t agree with the suggestion that prices must be low today just because stocks have not been doing well for eight years now. Stock prices are much lower than they were in 2000. But they are still sky-high by historical standards. Stocks are a dangerous long-term buy today.

I don’t agree with the idea that all should be invested in stocks or that any should always be invested mostly in stocks. Stocks are like any other asset class. There are times when they are a good buy and there are times when they are a poor buy. My thought is that it is important to learn how to tell the difference before putting money into the market. Those who are prepared for what is to come don’t experience the panics that have ruined so many middle-class investors in days gone by.


Wiser Investor July 5, 2008 at 6:20 pm

Bennett has been promoting his special brand of Financial planning for some time.

I suggest before anyone use his ‘planner’ or follow his advice, they should do some due diligence.

Google “Rob Bennett + Purcellville” or just go to these links:

One of his sites:

A site that tracks and comments on his activities. He frequently participates as “Hocus”:

Shaun Rosenberg September 1, 2008 at 3:49 pm

Great Post,

The stock market really is the best place to invest your money.

Owen October 6, 2008 at 2:22 pm

Surprisingly a lot of people are buying now when the market is down, including Warren Buffett. Investors are seeing the current market as a buying opportunity.

Damon Baird January 14, 2010 at 2:09 pm

Yea, I invested my entire life savings and assets into the stock market and I’m doing fine.

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