The TSX today continues to trade far lower than where it was at the beginning of 2022. The Canadian big board is currently down 11.5% year to date, and 14.6% since 52-week highs. But should you really buy stocks now?
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Here’s the argument
While shares of the TSX today are down, there’s already been an improvement even from just last week. Still, the TSX has dipped and dived all over the place this year, and a recession is likely to occur around the globe, including Canada and the United States, in 2023.
Because of this, it has some investors questioning if they really should buy stocks now? After all, if shares are only going to drop further, isn’t that putting your cash at risk?
Yes…but no
If you have cash that you’re going to need imminently, then you really should not be investing it right now. If you need to pay bills, put money into an emergency fund, retire in the next year, then don’t put that cash into something unsafe. No matter what the market is doing.
If you do, then yes it could certainly hurt your income over the next year or so. You’ve invested cash you need right away during an incredibly volatile market. So it’s true, your portfolio could end up falling even further during that time. And at a time when you need the cash.
However, there’s also an argument to be made to buy stocks now. Shares could fall further, it’s true, but if you’re investing long term, who cares? Yes that’s a flippant statement; however, if you look at the past few decades you’ll see that stock market history supports it.
History tells all
In the past 100 years, we can look back and see that the strongest companies always come back. That there are market bottoms, true, but the only reason an investor hits those bottoms is pure luck. You cannot know what the future holds, and therefore you cannot know for certain when there is a market bottom.
What investors should instead consider if they want to buy stocks now is whether there is a solid deal to be had. In the case of some strong stocks out there, there are absolutely incredible deals! Both in terms of share price, dividend yields, and fundamentals.
What I’d consider
If you want to buy stocks right now, go to your watchlist and see which stocks are offering a deal right now. But if you don’t have any on your watchlist at the moment, I would look for solid companies that have decades of growth behind and ahead of them.
For me, I would look at Brookfield Asset Management (TSX:BAM.A)(NYSE:BAM). Brookfield was founded in 1899 and has since grown to be a powerhouse in real estate. This includes everything from hotels to renewable energy down to infrastructure. If you can build it, Brookfield has it.
Because of this diversification, investors can invest in a longstanding global portfolio. It also therefore has a stable dividend yield at 1.46% as of writing. Yet shares are down a whopping 32.3% year to date!
Further, Brookfield offers value. It trades at 16.3 times earnings, 1.5 times book value, and a reasonable debt-to-equity ratio at 148%. At this value, it’s a great time to consider this stock as a long-term hold. And certainly one to consider if you want to buy stocks now.
Bottom line
If you wait for the market bottom, you could miss out on substantial returns. But if you instead buy stocks now while you’re certain you’re getting a deal, you will have nothing to later regret! That includes all the passive income you could collect. So don’t miss out on a deal that’s staring you straight in the face.
