Is it time to buy?
With the September malaise in full swing, and many stocks over 20% off their highs, many people wonder if it is a good time to buy. Normally, the consensus advice for people looking to get into the market, particularly for the first time, is to buy into an index ETF that mimics the S&P 500 (look at SPDR, VOO, and IVV). These funds have low expenses and diversify holdings automatically. If you have limited cash resources and do not have the time or inclination to monitor your holdings, this is the way to go. Most retirement plans only offer these types of funds - it limits decision making for people and allows them to track performance easily - if the index is up, their holdings will be up too. It’s straightforward.
I think a little differently. If you are just starting investing, particularly if you are young, I recommend you actually buy and hold a few stocks. This is because making the effort to find and research a stock, actually putting the order in, seeing it filled and then keeping an eye on your stock is the best way to get comfortable with investing. There is no better way to learn than by doing, and the mistakes you make when just starting out are the best lessons you will ever get. Your first loss is your best loss and it is better that this first loss is a small one on a single stock rather than a large one on many.
The best time to buy a stock is when the market is down, preferable down a lot, or the stock of a good company has dropped a great deal in an over reaction to a market event like weak earnings or a shock to a particular segment. Patience is very important. No one can time the market, but you can get in when the the market is down and have the satisfaction of seeing an immediate return on your investment when the market corrects itself. Mind you, it is hard to buy when the market is down. Warren Buffet said 'Be Fearful When Others Are Greedy and Greedy When Others Are Fearful'. This means that you have to wade in when things look dire and buy. Just try a little at first and over time you will get more comfortable with buying in downturns. I always wait to reinvest the dividends in my IRA until the market is down 5% or more.
So is it time to buy now? Not yet. Again, I think we will see more of a sell off. That said, I did buy little more Freeport McMoran (FCX) today and Wynn Resorts (WYNN.). Both were down a lot this week for different reasons and both are likely to rebound once Covid is under control. I may have bought a little early but I am convinced I will be happy I own them in a year’s time. Mind you , I will sell them both for a trade if they rebound 20% after tax before the year end (unlikely unless Covid is cowed). I will probably buy a bit more if they continue down. Meanwhile I will sell calls on them while I am waiting and I still have cash for the big down turn. (A lot of us have cash on the sidelines waiting for this mythical downturn.)
Market Today: Good news on retail sales (we are all still buying stuff it seems) meant the market started off positive, then fell only to rally later in the day and then fall into the close. All up, DOW and S&P only ending up down slightly for the day (Nasdaq up). A positive Nasdaq meant I could get out of tech puts like PayPal (PYPL), Shopify (SHOP), Nvidia (NVDA) and Crowdstrike (CRWD). A Moderna (MRNA) put gave me a boost. MRNA has replaced SHOP as one of the most reliable puts to make money on - volatile and lots of volume. And I made money on selling and re-selling ROKU calls. Playing with Coinbase (COIN) puts - pure speculation but I am not ready for Bitcoin yet.