So, how do you evaluate when to buy stocks and when to wait for a pullback in the market? The best answer is that you don't. Both passive index fund investors and individual stock investors will likely be better off consistently buying shares and ignoring the daily ups and downs of the market.

Is now a good time?

Is now a good time to invest in stocks?

If you're looking to invest for your future -- five, 10, or 40 years from now -- then now is as good a time as ever to buy stocks.

Despite ongoing recession fears, it's important to remember the market is forward-looking. Stock values are based on future expected earnings. Despite the occasional gross domestic product (GDP) contractions, earnings tend to go up over the long run. That said, there are still good stocks to buy during a recession.

If you invest consistently over time -- putting more cash into your investments every month or so -- you'll end up catching a correction or a stock market crash on occasion. Those are opportunities to invest even more than usual if you can swing the cash flow.

Of course, it's not particularly feasible to plan for the unpredictable. If the market could predict a crash in stock prices, a crash would never actually occur.

Is buying stocks on the dip better?

Is it better to buy stocks when they are down?

If you like to research stocks, it might be harder to find good buying opportunities when the overall market valuation climbs higher. Fewer stocks will present value relative to their underlying fundamentals, but that doesn't mean those opportunities don't exist.

On the other hand, you'll likely find more opportunities to buy shares of undervalued companies during a broad market decline. Those are great opportunities to act on the research you've done and buy shares well below where they were trading just a few months ago.

Warren Buffett once said, "I make no attempt to forecast the market -- my efforts are devoted to finding undervalued securities." For him, the question isn't, "Should I invest in stocks now?" It's, "Which stocks should I invest in now?"

If there's a stock with a good price, it's worth buying. Even if it goes down in the short run, trust the research you've done to produce long-term gains. But don't ignore the company entirely. Consistently check your investment thesis to make sure it's still valid.

How do you know when to buy?

How do you know when it's a good time to buy a stock?

Even buying a growth stock with strong long-term potential near the peak of a bull market run is far from a death sentence. While growth stocks tend to fall much more in price amid a correction or crash, those periods can also be catalysts for growth.

Some investors may be scared off by a small pullback in price, thinking more losses are coming. In fact, it's much more likely to be a correction (a drop of more than 10% but less than 20%) than a market crash (a drop of more than 20%). Stock market corrections happen all the time -- on average, once every other year or so. They can be a great opportunity to buy stocks while they're temporarily discounted.

What's the best time of day?

What's the best time of day to buy and sell stocks?

On regular trading days, the stock market is open from 9:30 a.m. ET until 4 p.m. ET. For investors who plan to buy and hold stocks over the long term, it doesn't make much difference what time of day they buy or sell.

Day traders prefer volatility so they can capitalize on price swings throughout the day. That's why you might read that the best time of day to buy and sell stocks is between 9:30 a.m. and 10:30 a.m. or 3 p.m. and 4 p.m. The first and last hours of trading see a lot more action than the middle of the day.

It's important to know that day trading and investing are two very different things. Investing is when you buy shares in a company. If the company performs better than anticipated, investors are rewarded with outsize appreciation in their shares.

What's the best day of the week?

What's the best day of the week to buy and sell stocks?

There's anecdotal evidence that the stock market dips most on Mondays after a bevy of bad news builds up over the weekend. It might also be that people aren't happy to be going back to work on Mondays (i.e., the Monday Effect), leading to a pessimistic stock market.

What's the best month of the year?

What's the best month of the year to buy and sell stocks?

There's also no shortage of theories and adages about the best month to buy or sell stocks. Maybe you've heard the phrase, "Sell in May, and go away." Or maybe you heard about the Santa Claus Rally. There's also the January Effect, which notes outperformance for certain market segments at the start of the year.

Investors usually sell some stocks at the end of the year as part of their tax planning. They want to lock in losses or take capital gains when it makes sense for tax purposes. That may present an opportunity for investors at the end of December or in early January, leading to the January Effect.

Related investing topics

Will stocks go up in 2024?

Why you shouldn't time the market

Some of the best investors in history had no interest in timing the market. Warren Buffett and Peter Lynch have avoided market timing throughout their careers. If they don't recommend doing it, what makes you think you can outsmart them?

Simply looking at a few statistics should show you why attempting to time the market is a big risk. If you invested all your money in an S&P 500 Index fund at the start of the century, you'd see an average return of about 6% per year over the next 20 years. That period includes the dot-com bubble and the Great Recession.

FAQs