How I'm getting ready for a stock market rally

Successful investing means always planning ahead…

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As most ASX investors would be painfully aware, the months of September and October of 2023 were pretty rough to have been invested in the stock market.

The S&P/ASX 200 Index (ASX: XJO) fell a nasty 3.5% over September and by another 3.8% over October. That was enough to briefly push the ASX 200 into official correction territory.

However, November has been a different story entirely for ASX shares. Over the month to date, the index has added a healthy 4.4%, even if we count today's 0.56% drop thus far. As such, one could argue that a stock market rally has already begun on the ASX.

But we're still a long way from where we were even nine months ago. Back in early February, the ASX 200 was above 7,550 points. That's more than 6% away from where the index is today (at 7,066 points at the time of writing).

If we're lucky, the ASX 200 could spend the next few months getting back to where it was in February. Now that would be a rally. Of course, there's no guarantee that the markets will get back to that level anytime soon. After all, there is no guarantee of anything on the share market.

But the ASX 200 has never once failed to exceed a previous all-time high in its history. I'm not betting that that stock market track record is about to break.

So what am I doing to get ready for this potential stock market rally?

Next stock market rally: What am I doing?

Well, to be honest, I'm waiting. I'm an investor who likes to buy my favourite shares at the lowest possible price. I was fortunate to have done a lot of buying over September and October. when the markets were going through that rough patch.

Some of the investments I picked up included CSL Limited (ASX: CSL), Vanguard Australian Shares Index ETF (ASX: VAS) and ProShares S&P 500 Dividend Aristocrats ETF (NYSEMKT: NOBL).

At the time, I had no idea that November (at least so far) would prove to offer such a decisive stock market turnaround. But given the prices of some of my favourite investments had seen a big dip, I thought it was a good time to buy anyway.

Now, most of those shares have bounced markedly off of their October lows. As such, I'm no longer as tempted to buy.

So I'm happy to wait and see what happens next. If my cash reserves replenish themselves over the next few months (Christmas will probably jeopardise that a little), I might buy some more shares. But I'm far more comfortable buying before a stock market rally, not during it.

Motley Fool contributor Sebastian Bowen has positions in CSL, ProShares Trust - ProShares S&P 500 Dividend Aristocrats ETF, and Vanguard Australian Shares Index ETF. The Motley Fool Australia's parent company Motley Fool Holdings Inc. has positions in and has recommended CSL and ProShares Trust - ProShares S&P 500 Dividend Aristocrats ETF. The Motley Fool Australia has recommended CSL. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Scott Phillips.

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