“The answer is a qualified yes,” stated a November issue of Fortune Magazine in an Investing column titled Time to Jump In?
The author then goes on to explain that now is a great time to get into, or get back in, the stock market. “Stocks aren’t exactly cheap, but for the first time in years investors can expect annual gains that should eventually approach double digits.”
Well, cheap is always a relative term. Stocks ARE cheap right now compared to where they were 12 months ago. With the 12 month high at just under 14,000, the DOW has dropped 41% since this time last year. I just bought a new pair of Sperry’s this weekend at a 40% off sale. I saved 35 bucks! That’s dinner and a matinee.
This is not to say that in the next 6 to 12 to 18 months that those purchasing stocks now will not lose money, because there is actually a good likelyhood that they will. However, the longer the term, the smaller the risk. The advantage to buying now is the tremendous long term gain potential. The disadvantage to NOT buying now is the risk of missing the bottom and losing an opportunity at potential long term gain. We may be in a recession, but historically, the market comes flying out of downturns. A study performed this year by Ned Davis Research found after studying 10 recessions after WWII, the average market return one year after the market low point was around 32%.
If the last 10 years have been on average bad, does that mean that the next 10 years will be bad also? Most likely no. In fact, odds are overwhelmingly good they will yield much better than average returns.
The interesting observation to be made right now is that the quite opportune time to purchase stocks now is actually parallel with the real estate market. Now is the time to be buying real estate. Like stocks, real estate is likely to continue to fall, but the bottom is near. Real estate, historically, has always been a good long term hold. Ownership is not without heartburn, but if you can’t stomach seeing your property values come down a little over the course of 10 years, maybe investing in real estate isn’t for you.
In many cases, prices have come down to 2003 levels. The average sold price on Panama City Beach during the third quarter 2008 was 10% less than what it was during the same period in 2006. On an individual basis, some prices have come down as much as 20 to 40%. Right now there are deals everywhere with motivated sellers willing to do just about anything to sell their property. In many cases, velocity sales has actually increased from last year, indicating the entrance of buyers into the market.
The best way to acheive healty returns in any investment is buying low. You know the saying – you make money when you buy, not when you sell. Now is the time to be making money.