Will there, or won’t there, be a second wave of Covid-19? Will there, or won’t there, be a second stock market crash? We’ve already seen upticks in coronavirus cases in various US states, in China, and in Germany. In the latter two, there have been renewed lockdowns.
The stock market crash? Some of the stocks I’ve been watching have already started to fall back after their early tentative recoveries.
But you know what? I reckon neither of my opening questions should make any difference to investors. By now, people should have already made whatever adjustments to their investing strategies they need. Hopefully, for most, there’ll have been few.
If you’ve a strategy, like Warren Buffett, of only buying top quality shares, and buying more of them when they’re cheap, you’ll presumably have made no changes at all.
Great buying opportunity
And, in keeping with your strategy, you’ll have invested more heavily in the exact same shares during the stock market crash. Only you’ll have snapped them up more cheaply. Won’t you?
But, you might be thinking, there could be a second pandemic wave and a second phase of the 2020 stock market crash. If that happens, you’ll be able to buy even cheaper than today. So why buy now after prices have started recovering, when you could buy cheaper later?
Well, what if there isn’t a second wave of the crash? And what if those tasty cheap shares are never this cheap again? It comes down to trying to time the market, and how very difficult that really is. It’s something that I certainly have no clue how to do. And it’s no better for the experts either. Even Buffett dismisses attempts to time the market as a mug’s game, and doesn’t try it himself.
Extending the thinking beyond the current stock market crash, we know for sure that markets go up and down. I’m not a gambler, but I’d put money on the odds-on near-certainty that we’ll have more crashes in the future. So doesn’t it make sense to sit on our money and wait for downturns?
Await the next stock market crash?
No, I really don’t think it’s a good idea. What if you’re waiting for a downturn, and we have a 10-year bull run rising instead? That’s relatively common. There’s also, of course, the loss of years of dividends while waiting for prices to tumble.
You might have good times when you really do manage to buy during a slump. But, over the long term, the stock market has many more upwards spells than downwards spells. So, statistically, you’re more likely to profit by simply investing steadily, regularly, over the long term.
What should count is the value of a stock today. If a stock is selling for below what you think it’s worth, maybe allowing for a reasonable safety margin, then buy it. If it doesn’t fall in the future, you’ll have missed an opportunity by not buying today.
And if there’s a new stock market crash and it does fall, buy more.