Is It Safe to Invest in the Stock Market Right Now? | Smart Change: Personal Finance


(Katee Brockman)

The last couple of years have been a rollercoaster for the stock market, to put it mildly. After bottoming out in March 2020, the market went on to shatter records over the following two years.

Earlier this year, though, stock prices slipped as the S&P 500 officially entered correction territory. Prices quickly rebounded, only to fall once again in recent weeks.

With all this volatility, it can be a daunting time to be an investor. But is there more turbulence on the horizon? If so, is it really safe to be investing in the stock market right now? Here’s what you need to know.

Image source: Getty Images.

Is a market crash looming?

Uncertainty can sometimes result in increased volatility in the market, and there’s a lot of uncertainty around the world right now. Between the conflict in Ukraine, soaring inflation, continued supply-chain issues, and an uptick in COVID-19 infections, there are many factors that could impact the stock market.

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However, that doesn’t necessarily mean a crash is coming. While the market will likely dip at some point (after all, stock prices can’t keep rising forever), nobody can say when that will happen or how severe the drop will be.

While it may be tempting to press pause on investing until the market is more stable, that can actually be a risky move. And there are a few reasons why you may be better off continuing to invest, regardless of what the market does.

Why it pays to continue investing

In the short term, the market will always experience some degree of volatility. Stock prices are constantly fluctuating, and it’s normal to see a lot of ups and downs. If you’re waiting until the market stabilizes to continue investing, then you might end up waiting forever.

While it can be daunting to invest during periods of volatility, keep in mind that over the long run, the market is much more stable. Over the course of weeks or months, the market may see wild ups and downs, but over years or decades, it has consistently earned positive average returns.

If you continue to invest consistently, your investments will likely see positive average returns over time, as well. But if you only invest when the market is thriving, it will take more time for your money to grow.

Also, if the market does take a turn for the worse, that can actually be a smart buying opportunity. Stock prices are lower during downturns, which means it’s a fantastic time to load up on quality investments at a discount. Then when the market rebounds, you could see significant gains.

Things to consider before you invest

Even if the market is volatile, there’s never really a bad time to invest. However, there are a couple of things to consider before you put more money into the market.

First, make sure you have a solid emergency fund and are prepared to leave your money in the market for at least several years, if not decades. If stock prices fall, it’s best to keep your money invested so you don’t risk selling your stocks when prices are at their lowest. With a strong emergency fund, it will be easier to avoid tapping your investments if you face an unexpected expense.

Also, be prepared to ride out any future waves of volatility. It can be daunting to watch your portfolio sink in value during a market downturn, but try to stay focused on the long term. By simply waiting it out, it’s likely your investments will recover eventually.

It’s an intimidating time to be an investor, but turbulence is normal for the stock market. By continuing to invest what you can afford and maintaining a long-term outlook, you can rest easier knowing you’re doing everything possible to keep your money safe.

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