Why NOW is the right time to invest in the stock market

by admin on June 11, 2011

My thinking is that NOW may be a great time to invest in the stock market. There is no doubt there has been an enormous amount of doom and gloom in the financial markets. We have had major high street banks needing to be bailed out by governments, we’ve had a dramatic cut in lending to businesses and individuals and we are currently in the biggest recession since the 1930s.

The big reason I think now is a good time is, all the drama has occurred. I feel things have probably got as worse as they are going to get.

Sure there are still some massive risks in the system. We don’t know how long the recession will last, we don’t know how quickly things will get moving again.

Many of the major stock markets have dropped in excess of 50% from top to bottom.

However, if we take a long term view I feel there is a good risk / reward ratio .

I see investing now as an exciting opportunity, but we mustn’t be blind to the risks. As I see it, the main ones are:
Double Dip Recession

Things appear to be improving, but theres always the risk that the downturn will worsen.
Banks hoard money

Banks may hoard money instead of lending it out an attempt bolster their balance sheets. If this happens too much, the recovery may take longer.
Sovereign debt Defaults

Many governments have drastically increased their borrowing to try to deal with the recession. If governments default on these debts, there could be widespread implications.
Printing money could lead to inflation

Many central banks have resorted to printing money, or the more “geeky” term quantative easing. Printing money always has the risk of inflation in the future. Both the US and British central banks have printed a large amount of money. The full effects are yet to be felt.

I always think to myself, this recession is the worst one i’ve seen, but it’s nothing that hasn’t happened before and unfortunately will inevitably happen in the future.

Stock markets move with human emotions, mostly commonly fear and greed.

We have had the greed stage, the banks have were too greedy for many years and now it has backfired. We now have the fear stage. Investors are scared as the future is uncertain.

We appear to be coming out of the fear stage, as the future looks more optimistic than it did at the start of the year.

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