The stock market isn't a casino.
Casinos actually have predetermined odds with the house taking a cut in games like poker where it does not have a stake in the action. Slot machines have a legal minimum payout and sports betting works with the house both taking a cut and oddsmakers moving the betting line to keep the action even.
The stock market has no such rules. A stock can go up or down as much as the market dictates. Good stocks you should own go down for short-term reasons that don't reflect on their long-term health.
When Costco (COST) drops because sales were slightly below analyst expectations or Apple (AAPL) falls over short-term iPhone availability concerns, that's not an actual reflection of the state of those companies and whether they're good investments. You don't stop betting on Steph Curry to win MVP because he has a cold on Wednesday.
The challenge with individual stocks is knowing when (metaphorically) a company has a cold and when it just blew out both ACLs.
Investing, unlike gambling, actually has a scenario where the play (so to speak) can have the edge. The problem is that advantage comes with time and to quote Warren Buffett, "nobody wants to get rich slowly."
Time, however, is the great leveler, the one thing that democratizes the stock market.
It also makes it easy to answer the question, "should I buy stocks now?"
So, Should I Buy Stock Now?
In short, the answer is always yes. Trying to guess when the market might bottom let alone making that guess for individual stocks is a fool's errand. To see how the market truly works, you need to zoom out.
The stock market looks very different when you change your time horizon. Let's take a look at the Dow Jones Industrial Average over time:
- Today (Dec. 9): -0.3%
- This week: -1.91%
- Past 30 days: +3.59%
- Past 6 months: +7.29%
- Past 12 months: -5.8%
- Past 5 years: +36.3%
Go back 20 years and the Dow traded below 8,500. It's at 33,694 as this is being written. If you simply bought a fund that tracked the Dow in Dec. 2002, 20 years later you would now have seen your money grow by nearly 300%. That's not an anomaly it's pretty typical of what happens over time.
It's a sort of simple recipe, buy good stocks now, and more or less wait.
What Stocks Should I Buy?
The short answer is that this question isn't as hard as most people make it. You could bet on that small-cap company that makes a part electric vehicle makers may need to use in all their batteries, or you could buy some Tesla (TSLA), Ford (F), and General Motors (GM). Now, you may not believe the old-school automakers may make the transition to an electric world or you may think Elon Musk will eventually crash and burn, but that's not the point.
Read Investing in Technology Sector Stocks: These five tech companies have a promising long-term outlook.
Buffett made billions owning Coca-Cola (KO) and Apple (AAPL). Both of those have been perennial winners that there's very little reason to think won't keep winning. That's generally a good approach to long-term investing. Look at the big winners and examine if there's a reason they might not going to keep winning.
Titans do fall (you may be glad you sold your Sears stock and General Electric (GE) may no longer be the giant it once was) but in the stock market, safe and boring are generally good choices. Yes, you should be buying stocks and those stocks should be shares of great companies you plan to hold for a really long time.
That's not as exciting a hitting on roulette or a big win at the craps table, but it's a sensible strategy that has made a lot of people very rich (eventually).
