Is now a good time to buy stocks?
I always advise clients to not buy stocks with money they will likely need in the next few years. The market is a longer-term investment, and anything can happen in a few years' time (good and bad). When legendary investor Shelby Davis was asked if now was a good time to buy stocks, he famously said, “Whenever you have the money is the best time to buy.”
Assuming you have a longer-term time horizon the best time to buy is when you have the money. I would add another caveat; do not buy all at once. Dollar cost averaging over a period of time into the market is a great way to spread money out and buy the highs and the lows rather than investing a lump sum at once.
How do you think the market will do for the rest of 2021?
I get this question regularly, and the truth is, I don’t know. What I do know is our economy still has a lot of Fed support with continued low interest rates and through their purchase of $120 billion in bonds every month.
Overall, the consumer is in good shape, and most businesses are faring well. Yes, we do have some negatives, such as inflation, potential tax hikes and a virus that is still not under control, but at the end of the day, the market follows earnings. If companies are doing well and growing profits, the market tends to follow suit. Sometimes the market gets ahead of this, and sometimes it’s too pessimistic, but over time it tracks corporate earnings. Conditions are still favorable for solid earnings.
The great investor, Peter Lynch, once said, “Far more money has been lost by investors preparing for corrections than has been lost in corrections themselves.”
Do you think inflation is permanent?
This is an interesting question. At the moment, competing forces are affecting prices. On one side, there are major supply and demand imbalances due to the pandemic. These include housing and semi-conductors, which affect most everyone in one way or another and driving price inflation on sectors.
In addition, deflationary forces have been at work for sometime now. These include globalization, tech developments, Amazon effect and demographics of an aging U.S. population with the baby boomer generation.
I believe that these supply and demand imbalances have to work themselves out; and then shortly thereafter, I believe the true inflation picture regarding its stickiness will be clearer. I also believe that the biggest threat to sustained inflation is higher wage prices that employers have to pay to get help.
Should I be buying Bitcoin?
Honestly, I don’t fully understand crypto. I have a hard time wrapping my head around how it is truly valued. There are no cash flows attached to it, and it appears the value is in a limited amount of bitcoin that can be mined. Also, I have a hard time understanding a currency that fluctuates so wildly.
I’m very reluctant to buy Bitcoin and use it to pay someone when I could buy it today and in a week it be down a lot.
Also, there is a lot of talk about environmental, social and governance, and Bitcoin doesn’t fit so well with ESG factors due to all the energy it requires to mine. I could be making a mistake in not owning Bitcoin but only time will tell. After all, Warren Buffett says that someone is going to get rich today trading cocoa beans, it just won’t be him. I feel the same about Bitcoin. Someone may get rich trading Bitcoin today, but it won’t be me.
~Lee Williams offers products and services using the following business names: Nowlin & Associates - insurance and financial services | Ameritas Investment Company, LLC (AIC), Member FINRA/SIPC - securities and investments | Ameritas Advisory Services (AAS) - investment advisory services. AIC and AAS are not affiliated with Nowlin & Associates.