With stock market volatility beginning to cool down, and stock markets globally continuing to head higher (or even to all-time highs), investors may be thinking now could be a good time to start building a portfolio or at least a few positions. Seeing the stocks one wants to own rally in a serious way while staying on the sidelines can be hard. That said, in this article I’m going to discuss why staying patient and watching the market instead of investing could turn out to be a great decision shortly.
With stock market valuations near or at all-time highs and the state of the global economy more fragile than ever, we’re now seeing what I believe is one of the greatest disconnects in history between valuations and fundamental economics. Most of the time, equities and economics move in the same direction. When these detach and diverge, is precisely the time investors ought to be concerned.
My suggestion for those investors who find themselves on the fence right now in terms of whether or not to put a chunk of money to work in equities is to be patient. Chasing stocks when they’re at all-time highs in a bubble-like environment where valuations are out of control has proved to be costly in the past. Staying invested and slowly chipping away at high-quality companies with defensive business models and excellent balance sheets is one thing. Testing the waters with a tech company holding a bubble-like valuation could be very costly.
Invest wisely, my friends.
