The smart investor: it’s always time to invest in the stock market

In this column published every two weeks, we give you concrete ideas for investing your money in the stock market.

It’s not easy to decide to reinvest in the stock market after having lived through a year as trying as 2022, especially since the predictions for 2023 are contradictory to say the least!

“Things still have to get worse before they get better,” JP Morgan chief strategist Marko Kolanovic told US broadcaster CNBC on Tuesday. He foresees a 10% drop for the flagship index of the United States, the S&P 500, during the first half of the year.

Another well-known Wall Street analyst, Tom Lee of Fundstrat, said on Monday that investors underestimated the positive impact of slowing inflation. His prediction? An increase that could reach 25% for the S&P 500 in 2023.

So who to believe? “Contradictory messages are part of the reality of the market. There are people who say that when the markets go up, it’s too expensive and that when the markets come back down, the worst is coming… Cimon Plante, portfolio manager affiliated with National Bank Financial.

“If you stay fully invested, you’re going to participate in 100% of the downside and 100% of the upside, which is going to give you a decent return,” he adds. Trying to predict market movements means exposing yourself to the risk of missing the good days that make all the difference. And if there’s anything the past three years have taught us, it’s that you can’t predict the future or market movements. »

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Consistency pays off

Which brings us to the good old strategy of investing by periodic installments, better known by its name in English, dollar cost averaging (DCA). First described in the famous book The Intelligent Investor by Benjamin Graham, published in 1949, it aims to counter market volatility.

“Sometimes we try to complicate our lives, to believe that we will succeed in beating the markets when the best strategy is the simplest. It is to always be constant, to invest regularly and to try to reduce your average cost while remaining on the market, regardless of the fluctuations”, summarizes Youcef Ghellache, founder of Educfinance and professor of finance at Collège Montmorency. .

If you want to get into periodic investing, experts recommend going for quality stocks like stocks in well-established companies or diversified funds. The strategy is particularly advantageous with a broker that does not charge any commission on stock market transactions (Banque Nationale Courtage Direct, Disnat, Wealthsimple) and with mutual funds without acquisition costs.

Given rising interest rates, however, there are other possibilities that may be more attractive depending on your personal circumstances, Ghellache points out:

  • Repay loans or mortgage
  • Put your cash in a high interest account or GIC
  • Invest in bonds

Do you have any topics to suggest to me? Write to me: [email protected]

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