When the stock market is in free fall like it is now, investors are scared out of their minds. Its terrifying to log on everyday to your broker account, IRA, or 401K to see the damage. In many cases investors like you and me are losing more per day than we make at our jobs. Now THAT is frightening!
But for the soon to be first time investor or anyone who has been thinking about putting more money in the market, falling stock prices are a good thing. That is because stocks are getting cheaper as they go down and buying anything on sale is better than paying full price. ( If you are thinking of opening a broker account so you can buy stocks I recommend TradeKing for investors because they have a low $500 minimum deposit requirement for new accounts and their trading fees of just $4.95 are half of what many other brokers charge)
Stock Prices Are Going Down But They Might Not Really Be “Cheap”
Now, there are many factors in play and you might make a case that if company earnings are going down (which they are in many cases) and the stocks go down in response to those lower earnings, the stocks aren’t really getting cheaper. Also if stock prices were too high to begin with as many suggest, then sinking prices just bring them down more in line to where they should have been in the first place.
You might also make the case that if the whole world sours on the stock market (which happens from time to time) and many people just want out at any cost, then now may not be the best time to buy stocks. Its true: when the market keeps going up its easier to make money than in times like these when everything is falling.
But in general, I alway prefer paying less for a stock than more. And when the stock market universe is in panic mode, investors often sell the good stocks along with their bad stocks just because they want out. <—Meaning: some good stocks of very healthy companies get oversold and now (or soon) could be a good time to buy.
Tanking Markets Are Not Fun For Anyone
The simple fact is, no one is happy right now: not short term investors or long term investors. But if you are a beginner or someone with cash who has never gotten around to investing, now or sometime soon might be a good time to get started. For long term investors (as I am) it is always better to buy a stock at a lower price than at a higher price. Getting in at a lower price makes you more money than getting in at a higher price every time (if the stock ultimately goes up).
Investing for your retirement future is what I always recommend and NOT short term trading. Buy stock(s) and keep them for as long as you feel the companies are healthy and in industries that are vibrant. When you buy a stock you are buying a share of a company, not just a piece of paper! You are putting your faith in a company that its management will do a good job of navigating the waters in both good times and bad. You are betting that a company will continue to make money and grow their business which in turn should grow its stock price. Remember that. You are buying something real that you actually own, not something imaginary, and that something is a piece of a real business.