How safe is the stock market right now?


The stock market has rebounded in recent weeks, with the S&P500 up more than 11% over the past month.

While there are countless factors affecting stock market performance, at least part of the reason for this surge could be the positive inflation report from the Bureau of Labor Statistics. According to the report, inflation slowed in July, giving some investors hope that it peaked.

But it is not yet clear if this bear market is really over. So is it really safe to invest? Or should you abstain? Here’s what you need to know.

When is the best time to invest in the stock market?

The market’s positive trajectory over the past few weeks has been promising, but there is no guarantee that it will continue. The stock market can be unpredictable, and even experts cannot predict exactly how it will behave.

The good news, however, is that there isn’t necessarily a bad time to invest. While it can be tempting to only invest when the market is booming, it can be costly because you only buy when stock prices are at their highest. By also investing during downturns, you can get quality stocks at a discount.

This strategy is known as cost averaging and involves investing consistently throughout the year, regardless of how the market moves.

Sometimes you will end up buying when prices are at their highest. Other times you will invest when the market is at its lowest. Over time, however, these highs and lows should even out. Not only does it take the guesswork out of when to invest, but it’s also cheaper than investing only when prices are high.

Is it safe to invest now?

Because there is not necessarily a bad time to invest, this could be the perfect opportunity to buy stocks. The market has yet to fully rebound, so many stocks are still discounted.

The most important thing to keep in mind is that investing is a long-term strategy. If the market falls again, your portfolio could lose value – and that’s okay. Short-term ups and downs are normal, and over time the market has historically seen positive average returns.

It can be difficult to avoid getting caught up in the daily swings of the market, but a long-term perspective can make this volatility easier to bear. For example, while the S&P 500 is currently down about 10% year-to-date, it has risen more than 200% over the past 10 years.

^ SPX data by YCharts

By staying focused on the long term, those little daily moves will matter less. Even if the market falls again, it will eventually rebound.

Keep your money safe

One of the most effective ways to protect your portfolio during times of economic uncertainty is to choose the right investments.

Even fragile stocks can sometimes thrive when the market is booming and the economy is strong, but only the strongest companies will survive downturns. Companies with the soundest underlying fundamentals are the most likely to weather tough times, and the more of these stocks you have in your portfolio, the better.

Again, no one knows for sure how the market will perform in the weeks or months ahead. But when you have a portfolio full of healthy stocks, your investments are much more likely to rebound no matter what.

It’s not easy to invest when the market is turbulent, but it’s not as risky as it seems. By choosing the right stocks and holding them for the long term, you can rest easy knowing that your money is as protected as possible.

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