Stock markets are down around the world. And they might be about to go lower. So is it a good time to invest in stocks? I think it is and I’ve been adding to the investments in my portfolio recently. Here’s why.
Buying more shares
Quite simply, lower share prices give me an opportunity to own more of the companies that I’ve already invested in at more attractive prices. From an investment perspective, if I buy shares in a company for less than I previously paid for them, then my return over time should be better.Â
I own shares in Amazon. The company’s shares currently trade for less than I originally paid for them. That can be hard to take. But it actually means I can make a further investment today and the return on the investment should be greater than the return on my initial investment. In the case of Amazon, I do think it’s a good time to buy more for my portfolio.
New opportunities
Declining share prices can also provide new opportunities for investors like me. An example of this is Meta Platforms. I’ve long thought that it’s a wonderful business. Until recently, however, I felt its shares traded at prices too high for me.Â
Lately, however, the price has fallen quite significantly. I now think the price is quite attractive based on the amount of cash I anticipate the business generating in the future. Accordingly, I’ve used the falling share price to make an investment in the business. Again, I really do feel it’s a good time to invest in the stock for my portfolio .
Be careful
Of course, the fact that a stock has fallen a lot does not automatically mean it’s a good investment. An example of this is TUI. The stock has fallen sharply, but I don’t think that that it’s the right time to dive in and buy TUI stock for my portfolio. This is because I anticipate the company’s future earnings being hindered by its debt. So even though TUI’s share price has fallen substantially, I’ll pass on that one.
TUI’s shares have fallen further than Meta shares have in the last month — 20% compared to Meta’s 15%. This highlights the point that it doesn’t matter to me what price a company’s shares used to trade at. What matters to me is the price that they trade at now.
The stock market might fall more, or it might rebound from these levels. As an investor, however, what matters to me is where the price of stocks are now and is the price right for me, not where they might be next week or next month. Since my intention is to hold the investments that I make for a long time, I’m not concerned about where the share price goes in the short term, as long as I’m happy with the levels that I’m buying at. Since the stock market decline is giving me prices that I find attractive, I think now is the time for me to buy those shares I really believe in.