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Value investing is the art of buying stocks that are trading at a significant discount to their intrinsic value. I am definitely a value investor in this sense. So, I would be inclined to think that it is good to buy at a time when the stock market is like that FTSE 100 there is less. My reasoning is that a lower price would increase the opportunity to profit from mispricing.
Ironically, despite the uncertain economic climate, the index hovered at 7,770. To put the current achievement in context, the record level is 7,877. As great as it is for investors, it doesn’t necessarily scream a bargain opportunity for me.
It’s not a question of time
Instinctively, I would consider waiting for a market correction to get a lower entry point. However, doing that would be like ‘winning the lottery’ according to financial services companies Charles Schwab. After conducting a study on market timing, the company concluded that the effort was doing more harm than good. Even the sage of Omaha, Warren Buffett, believes that trying to time the market is a waste of time and harmful to investment success.
Take this policy on board, I don’t need to be bothered by whether the FTSE 100 is at an all-time high or low. However, investing for the long term is the best way to get positive returns. This gives my investment the opportunity to rise and fall in the stock market. Of course with a purpose, I sell it for profit.
Will the FTSE 100 keep going?
Reassuringly, I have found that the stock market tends to rise historically. I don’t have a crystal ball. But in 10, 20, 50 years from now, I think the stock market will be higher.
Past performance is not an indicator of future returns, but if I were to determine the value of the stock market from 1950 to today, it would be an upward sloping curve.
Of course, I want the FTSE 100 to keep winning. But if it stagnates, or reverses, it is not important. The longer I hold the stock, the better chance I have.
Discover the FTSE 100 value stocks
Even though the FTSE 100 is in difficult territory, that shouldn’t stop my approach of finding unloved, cheap stocks that offer the potential for capital appreciation (and income) over the long term.
The FTSE 100 being close to its current high is irrelevant to my long-term goals. So, I won’t care. What I want is what I can control. It picks stocks that I believe are most mispriced relative to their intrinsic value.
So, to answer the initial question, is now the right time to invest? yes already. It is always time to invest.
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