Is Now a Good Time to Buy Stocks?

"Is it time to jump back into equities?"

This is one of the most common questions we get from clients. In the first place, I have to point out the obvious: The question reeks of market timing, which is a problematic concept in and of itself.

And in the second place, without context around one’s investment objectives, tolerance for risk, investment horizon, income and liquidity needs, it’s impossible to answer that question effectively.

First Things First: Stick to Your Plan

Ultimately, we believe that your buying and selling decisions should be guided by a long-term financial plan appropriate for your age, wealth, risk tolerance and goals.

If you’ve done that, then your allocation decisions will be guided by considerations like rebalancing to your predetermined targets, or perhaps making comparatively small trades. That’s vastly preferable to making wholesale trades into and out of asset classes.

How We Handle Trades

When clients ask about buying stocks in this environment, we can answer the question in the context of our own multi-asset portfolios, in which we make shorter-term, tactical allocation decisions.

In those portfolios, we remain underweight equities. We still find it too early in this market cycle to get back to neutral or overweight equities. Our thinking is mostly driven by the fact that bonds are offering attractive yields at a time when stock earnings are falling.

Averaging Into the Market

With that said, for those with a long-term horizon and high tolerance for risk, it may be appropriate to begin to average back into the market at some point this year.

Again, we don’t believe it’s possible to identify “perfect” entry points or precise market tops or bottoms. Instead, we think it may be beneficial for investors to partition their available investment funds and invest over a period of months or quarters.

This is a tried-and-true method for gradually increasing one’s equity exposure, with the benefit of automatically dollar-cost averaging.

Does Market Timing Work?

While some people get lucky, no one has ever been able to predict the best time for getting in and out of the market. Getting the timing wrong—for buying or selling—can have a disastrous impact on your portfolio’s returns. That’s another reason we advocate for a long-term, diversified approach.