Stock up: Now is time to buy at low prices
Marnie Phillips cashed in a CD and had nearly $10,000 to spend. With the economy tanking, it wouldn’t have been surprising if she had paid some bills or even stuffed the money under a mattress.
But Phillips, a real-estate agent for Re/Max, figured she’d roll the dice. She asked her financial adviser to invest the small windfall in the stock market.
Many people would argue that now isn’t the wisest time to buy stocks. With listings on the New York Stock Exchange, NASDAQ and other exchanges priced as low as dirt, buying volatile stocks seems as sensible as burning money.
Indeed, a recent Associated Press-GFK poll of consumer confidence found that just one in three people surveyed believe now is the right time to buy stocks.
But financial analysts recommend that now, in fact, is a good time to buy stocks precisely because listings are low. What goes down will eventually go up.
The trick is knowing which stocks will blossom again and which ones won’t survive.
“It’s such a great opportunity because the market is off 40 percent,” said Ken Hang, a financial adviser for Edward Jones in Nashua.
Yet, Hang urges people to use caution. The market could drop further, or it could stagnate for another two or three years, he said.
Phillips gave Hang her money and the power to invest.
“I left it up to him,” she said. “I have a lot of faith in him. He’s watching it every day.”
As with many investors, Phillips reasons that she is “in the market for the long haul. I figure it’s going to rise at some point.”
That prudence is what Hang and other financial advisers urge investors to use. For one, Hang advises people to not pull all their money out of their troubled 401(k) accounts. They’ll rebound eventually, he said.
Buying individual stocks also requires a common-sense strategy, Hang and others said.
The Institute for Trend Research in Concord doesn’t forecast stocks; rather, it studies business cycles and long-term trends. But Jim Chappelow, of ITR, said “maybe it is a good time” for people seeking promising stocks to get bargains.
“Our principal recommendation is to put away the shotgun and bring out the pistol,” Chappelow said of a buyer’s approach. “Do your homework targeting investments . . . and not with the expectation that you can get a single big” deal.
Chappelow, like Hang, urges people not to think the whole market will turn around and universally improve. Some stocks will rise before others, so that’s why it’s wise to have the best information on each offering being considered, Chappelow said.
One market to consider is energy, Oppenheimer & Co. analyst Fadel Gheit told The Associated Press.
Gheit expects energy stocks to follow in the direction of crude oil prices, which he predicts will rise in 2009 on reduced supply and in 2010 on increased demand and lower inventories.
Hang wouldn’t offer the names of stocks to consider, but said investors should look at a company that has a large cap that pays dividends, has cash flow and a seemingly strong future.
Hang did advise people to stay away from American carmaker General Motors, despite its bargain price.
“A company like GM has too many questions,” he said. “The fundamentals aren’t there. Not to say that it won’t be a good stock to own, but without the fundamentals now, I would not.”