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Is Now the Right Time to Buy Stocks?

If you looked at global stock markets today you would think the global economy is doing just fine. The S&P 500 Index in the US is up over 30% in the past seven weeks or so.

The Hang Seng Index, meanwhile, hasn’t gained as much yet it’s still up over 12% since it reached a recent bottom on 23 March.

It doesn’t seem to add up though given we are going through a tumultuous time as Covid-19 has hit businesses everywhere.

However, does that mean we, as investors, should stop investing in great companies and refrain from buying stocks? I believe the answer is a resounding “no”. Here’s why.

Don’t bother timing the market

It’s a well-known mantra that is constantly drilled into investors – “don’t try to time the market” – but how many of us actually heed it when we buy stocks?

In that sense, taking the emotions out of investing is ideal, which is why I’m such a big believer in regularly investing, or dollar-cost averaging, into the market. That holds true, as long as you have faith in the companies you’re investing in.

Buying for the long haul

That brings me nicely to the next point, which is to (obviously) buy great companies. However, what’s less obvious is that it really doesn’t matter when you buy or invest in a great company as long as your time horizon is long term.

Just look at Tencent Holdings Ltd (SEHK: 700). Yes, you could have been one of the fortunate few investors who bought shares in its IPO in 2003 and be sitting on a massive gain.

However, you could also have bought shares at the peak of the 2015 Chinese stock bubble. Back then, its share price ran up 45% in a matter of months and then duly crashed by over 20% in the next few months.

But, would it have mattered? Not really. Buying Tencent at the peak of the bubble in 2015 would have seen you snap up shares for HK$160. And where does it sit today – five years later? It’s at HK$430, translating to a gain of around 170%.

Time in the market matters most

The point I’m trying to make is that it’s always the right time to buy stocks. That’s particularly true for stocks that you think have long-term potential.

That’s because timing the market is impossible – no one can do it and anyone who claims they can shouldn’t be believed.

What matters most is ensuring you stay invested in the market through the ups and downs, while holding on to great companies that can keep growing over the long term.

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The information provided is for general information purposes only and is not intended to be personalised investment or financial advice. Motley Fool Hong Kong contributor Tim Phillips owns shares of Tencent Holdings Ltd.