Whether or not the U.S. stock market is truly experiencing its longest bull run ever, one thing is clear: U.S. stocks have been going up for a long time. The current bull market has been going strong since 2009, with only minor corrections (drops of at least 10 percent in a stock or index from its previous high) providing the bumps in the road.
There is some disagreement on how historic the length of the current run actually is. For example, Forbes points out that the Financial Industry Regulatory Authority still gives the honor to the 12 ½ year run from October 1987 to March 2000, while CNBC suggests a different starting point for that one—October 1990. According to CNBC, this makes Aug. 22, 2018 the day the current bull run took the crown.
Either way, if you’re a student finishing up a four-year degree this year, U.S. stocks have been on a tear since you were in your last year of middle school. All you’ve ever really known is a strong U.S. bull market.
So you might be thinking that now could be the time to start investing in the market. After all, you wouldn’t want to be left behind and miss out on all those stock market gains.
But not so fast.
While the U.S. stock market has benefited current investors by going up for so long, it doesn’t present an especially attractive entry point for new investors. Think of the current stock market as a popular brick-and-mortar store selling widgets. The widgets have been on sale and selling like crazy. But, alas, the sale is over. Instead, the store now charges way more for the same widgets.
If what I’m suggesting sounds familiar, it should because it’s investing 101: buy low and sell high. However, this principle can be easier said than done when dealing with stocks. It’s easy to discern the value of a good dress shirt that is on sale. Discerning value can be more difficult when applied to companies and even broad market indexes.
There can be a natural inclination to want to cut your losses after seeing profits disappear during a bear market. The problem is that a bear market basically means that the stock market is on sale. This is when your profits can be made—that is, if you buy and hold until at least the next bull run when the price goes back up again.
Many will undoubtedly say that any form of market timing is dangerous, since no one can predict when the market will top out. While I agree that the current market cycle should not be the only factor considered when investing, potential investors shouldn’t be oblivious to it either. After all, your eventual stock or fund profits will be determined by the initial purchase price (called the “cost basis”) of your shares.
An alternative to waiting out the current bull market is to invest using dollar-cost averaging. If you can afford to invest on a regular basis each month, then you would be buying new shares whether the market is up or down. The idea is that returns would average out in your favor over the long term.
If your budget doesn’t allow for investing on a monthly basis, waiting for a better entry point should pay off. This bull run won’t go on indefinitely. Remember that patience is a virtue.