Daily Outlook

4 Reasons Now Is the Time to Buy Stocks – Not Sell

1. Selling Fatigue Has Kicked In UBS strategists said we are seeing a “selling fatigue” in the markets as investors no longer overreact to bad news. Stock market volatility has finally cooled down after worries about coronavirus pandemic fueled weeks of sharp price swings. The Dow exited the bear market and entered a bull market on Thursday after hitting multi-year lows. While there will likely be other declines, the rebound could give investors more courage to buy the lows knowing that there is potential for making a good profit.

2. Stocks Have The Best Risk-Reward Ratio In Two Years According to Mike Wilson, Morgan Stanley’s investment chief, the stock market now offers the best risk-reward ratio in two years. Coronavirus risks have driven prices to multi-year lows. While the risks of coronavirus persist and the U.S. economy is entering a recession, investors with liquidity can buy quality stocks at attractive entry points. Apple is one such example. The tech stock’s trailing and forward P/E are now 20.35 and 19.23, respectively, down from 24.70 and 22.17 at the end of 2019.

3. Trying To Time A Bottom Before Buying Stocks Isn’t A Good Strategy While stock markets are rebounding, there are chances they haven’t reached a bottom yet. We don’t know when the coronavirus will be under control. To help support an economy hit by the coronavirus pandemic, Donald Trump signed on Friday a $2.2 trillion economic rescue plan. The U.S. stimulus package is the largest of all time, but might not be big enough as infection rates are rising.

While stocks may not have touched the bottom, investors should avoid trying to time when that occurs. Doing so is notoriously difficult and it could come at the expense of significant returns. Investors are better off re-entering the market at price levels they’re comfortable with.

4. You Buy More Shares When Prices Drop Volatility can be your friend if you regularly contribute to your portfolio. If you contribute to a 401(k) twice a month, you increase your existing holdings by buying stocks at different prices. When prices are lower, you buy more shares. When prices are higher, you buy fewer shares. This strategy is called dollar-cost averaging. As frustrating as falling stock prices are, keep in mind that buying more shares at low prices puts you in a stronger position when prices start to rise again. It’s less risky to buy stocks in small amounts now than in large amounts, as the stock markets might not have reached a bottom yet.

4 Reasons Now Is the Time to Buy Stocks – Not Sell, CCN, Mar 30

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