A stock market recovery may be a while off. But thats not necessarily a bad thing
The stock market has fallen this year. persistently high inflation, aggressive interest rate hikes by central banks, weakening consumer confidence, rumors of a recession, the war between russia and ukraine, high energy prices and disruptions in the supply chain are some of the reasons.
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Looking at the economic uncertainty we’re facing right now, my gut feeling is that the stock market’s recovery may take a while. I don’t think we’re likely to see a v-shaped recovery like we saw in early 2020. However, for long-term investors like myself, that’s not necessarily a bad thing. let me explain why.
Reading: When will stock market recover
I want to buy cheap
I’m in my early 40s and plan to retire around 60. This means I have 15-20 years to save and invest for retirement. During that period, I will be a net buyer of the stock as I build my retirement portfolio.
Now, do I want to buy shares at high or low prices in the next few years? the answer is low prices, of course. the more money you can put into stocks while the market is down, the better. that’s because I’ll get more for my money. and buying low means that when the stock market finally recovers (as it always has in the past), the value of my portfolio should skyrocket further.
the wisdom of warren buffett
This concept of ‘buy cheap’ is well explained by billionaire investor Warren Buffett: “If you expect to be a net saver for the next five years, should you expect a higher or lower stock market during that period? Many investors they are wrong about this. although they are going to be net buyers of stocks for many years to come, they are happy when stock prices go up and depressed when they go down. this reaction makes no sense. only those who will be sellers of stocks in the near future should be happy to see the stock go up. would-be buyers should prefer lower prices.”
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so the way I see it, if the stock market was down for a year, two years, or even five years, it wouldn’t be the end of the world. because this would give me a great opportunity to build substantial positions in world class companies at great prices.
I am confident that eventually the stock market will experience a recovery. however, I want to invest a lot of money before that happens.
stocks I plan to buy before a rally
In terms of my investment strategy, I plan to continue building my portfolio around the big tech companies apple, amazon, alphabet and microsoft. These four play an important role in our lives these days and I think they are likely to become more dominant in the coming decades as the world becomes more digital.
I also plan to acquire shares in other areas of technology, such as electronic payments (visa, mastercard) and semiconductors (nvidia, >lam research), as I expect these industries to grow significantly in the coming years as well.
At the same time, I want to buy more defensive dividend stocks to balance my portfolio. unilever, diageo and smith & nephew are some examples here.
If I can create positions in these types of high-quality companies at low prices in the next few years, I will be very happy.
See also : 6 Back-to-School Stocks to Add to Your Shopping List | Investment U
Publication of a stock market rally may take a while. but that’s not necessarily a bad thing it first appeared in motley fool uk.
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edward sheldon has positions in alphabet (c shares), amazon, apple, diageo, lam research, mastercard, microsoft, nvidia, smith & nephew, unilever, and visa. the motley fool uk has recommended alphabet (a shares), alphabet (c shares), amazon, apple, diageo, lam research, mastercard, microsoft, nvidia, smith & nephew, and unilever. suzanne frey, executive of alphabet, is a member of the board of directors of motley fool. John Mackey, CEO of Whole Foods Market, an Amazon subsidiary, is a member of the Board of Directors of Motley Fool. The opinions expressed about the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as stock advisor, hidden winners and professionals. Here at Motley Fool, we believe that considering a wide range of perspectives makes us better investors.
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