MENU

Urgent: Why you can’t afford to wait to buy stocks

The Australian stock market’s recent performance has prompted investors to question whether now is really the right time to be buying shares.

So far in 2014, the S&P/ASX 200 Index (Index: ^AXJO) (ASX: XJO) has returned just 1% despite a stellar February earnings period. By this time in 2013, the market had already risen 6% as investors flocked towards the safest and highest-yielding stocks available – particularly the big four banks and Telstra Corporation Ltd (ASX: TLS).

What’s more, the US recovery has not been as smooth as had been hoped for and there are concerns regarding China’s future growth prospects which has caused heavy volatility in commodity prices.

So has the market lost its steam? Is it worth the risk buying shares now, or should you be waiting for the market to take another dive before even considering it? After all, some analysts are predicting a massive downturn or correction after years of strong returns.

Unfortunately, the nature of investing in the stock market is that there will always be risk. Of course, it could be downhill from here, just as those analysts forecast, but it could also climb much higher. As the old investing joke goes, economists have predicted nine of the last two recessions, meaning that their predictions should only ever be taken with a grain of salt.

That’s why the stock market reaps greater returns than other investment classes, like term deposits or bonds. There is more risk involved, but that risk can be minimised by investing in quality companies that are trading at reasonable prices. Some that are particularly attractive today include Coca-Cola Amatil Ltd (ASX: CCL), Collection House Limited (ASX: CHL), Crown Resorts Ltd (ASX: CWN) and Select Harvests Limited (ASX: SHV).

Foolish takeaway

Although you could be risking losing money in the short-term by buying now, you would be maximising the possibility of greater long-term rewards. In fact, choosing to remain on the sidelines could prove to be a much riskier strategy than actually buying shares! Just ask those investors who missed out on the market’s 35% rally since mid-2012 because they were waiting for even lower prices.

The top ASX pick you've never heard of...

Top Motley Fool analysts just identified their #1 ASX pick for 2014, a small-cap stock that could be poised for big gains (and offers a fat, fully franked dividend!). Discover all the details now, including the name and code, in this FREE investment report, "The Motley Fool's Top Stock for 2014."

Motley Fool contributor Ryan Newman owns shares in Collection House.

Two New Stock Picks Every Month!

Not to alarm you, but you’re about to miss a very important event! Chief Investment Advisor Scott Phillips and his team at Motley Fool Share Advisor are about to reveal their latest official stock recommendation. The premium “buy alert” will be unveiled to members and you can be among the first to act on the tip.

Don’t let this opportunity pass you by – this is your chance to get in early!

Simply enter your email now to find out how you can get instant access.

By clicking this button, you agree to our Terms of Service and Privacy Policy. We will use your email address only to keep you informed about updates to our website and about other products and services we think might interest you. You can unsubscribe from Take Stock at anytime. Please refer to our Financial Services Guide (FSG) for more information.