As a young investor (33) should I be happy when the stock market goes lower? Buy low now, sell high in 30 yrs?

Answer 1

Yes! Invest the same dollar amount every month, no matter whether the market is up or down. When the market is down, you're buying "on sale".

However, don't try to time the market by waiting for the dips. Nobody knows when they're going to happen, and you miss out on a lot of growth while you're waiting.

Answer 2

It's all about opportunity cost. Another answer recommends dollar cost averaging, but studies have shown that approach doesn't always work. If you buy every month, for example, in a steadily rising market, as we've had for the past four years-plus, you will end up paying more than if you wait for the dips, as now.

The question now is ... is this just a corrective dip or is it the beginning of something worse. Back in 2002, a number of commentators declared that the secular bull market that began way back in the mid 1980's (at the end of our big inflation) had come to an end and we were now in a secular (meaning 20+years) bear market. A year later the market took off and hasn't really looked back since. Commentators now are saying that inflation is a looming problem and inflation is bad for stocks. But no one knows the future and inflation right now is not an apparent problem.

I think you would be okay to do some buying now -- you can see my own recommendations, and why I made them, at www.extramayo.org. It's free.

Answer 3

"A young person should get down on his knees and pray for a stock market crash, so that he may purchase his retirement shares at firesale prices." - William Bernstein, The Four Pillars of Investing

"The ability to ignore current market conditions is one of an investor's greatest weapons." - William Bernstein, The Intelligent Asset Allocator.

"The fact that stock prices have fallen only makes them safer, not riskier." - Benjamin Graham, The Intelligent Investor

This little stock market downturn is great for people like you and me (I'm 31), but bad for my parents.

People often wonder, "what should I do in response to a mareket downturn"? I definitely agree with the first poster in that you should not wait on the sidelines until the market dips. Make your regular contributions regardless of market conditions.

However, when the market dips, there are two things you might want to consider. First, if you have extra money that you do not need, you can make an additional contribution (above your regular contributions). However, this may not be possible. Another actuion you can take when the market makes a significant increase or decrease is to rebalance your portfolio back to your target allocation. This is another form of "buying low and selling high". Yes, you should be rebalancing at regular intervals. But, if the market makes a major change, you can take advantage by doing an extra rebalance. Just don't change your target allocation.

Answer 4

Still depends on what you buy. Some investments never come back. Also beware of buying low and selling lower. Most long term strategies go out the window when your account has shrunk enough from bottom fishing so you either sell in disgust or spend the next 5 years waiting to break even and start all over.

Answer 5

Absolutely, that is the way to think about it. When the market goes down, your IRA & 401(k) contributions are buying shares on sale. AND, you're buying MORE shares with the same amount invested every paycheck.