Is It Still Safe to Invest in the Stock Market Right Now?

With the S&P 500 officially in a bear market, it can be a daunting time to invest. Stock prices have continued to slide over the last few weeks, and investing right now could feel like you’re putting your money at risk.

However, the stock market is safer than you might think — even during downturns. While there are a few reasons you don’t need to worry about the market’s future, there are also a couple of situations where it may be best to avoid investing for now.

Keeping your money safe during volatility

If there’s one thing to know about the stock market, it’s that every crash and bear market has eventually given way to a bull market. In other words, not only has the market recovered from all previous downturns, but it’s also gone on to see positive average returns over time.

^SPX data by YCharts

Nobody can say for certain how long this bear market will last or whether stock prices will fall further before they recover. It’s extremely likely, though, that the market will perform well over the long term.

Because investing is a long-term strategy, there really isn’t a bad time to invest. In fact, bear markets can actually be fantastic investing opportunities because prices are lower. If you buy now and hold your investments throughout the rest of this downturn, you could see substantial returns when the market inevitably recovers.

In addition to keeping a long-term outlook, a diversified portfolio can protect your savings further. When you own at least 25 to 30 stocks in multiple industries, your investments have a much better chance of surviving volatility.

Even if one or two of your stocks are hit hard or don’t recover from a downturn, your portfolio as a whole should be just fine.

When you may want to avoid the stock market

While it’s generally safe to invest at any time (even during bear markets), there are a couple of situations where it could be risky.

When you invest, it’s best to keep your money in the market for at least several years — if not decades. If you invest now but later realize you need that money, there’s a chance that stock prices will have fallen further since you invested. In that case, you might have no choice but to sell your investments at a discount to lock in (and minimize) those losses.

For that reason, if you don’t have any emergency savings, if you’re struggling to pay the bills, or if you have any reason to think you might need this money in the next year or two, it may be best to avoid investing for now.

Once you have a solid stash of savings and are confident you can keep your money invested for the long term, that is the perfect opportunity to start building wealth in the stock market.

Market downturns can be difficult to stomach, but they’re also not as daunting as they might seem. By investing what you can afford and keeping your money in the market for the long term, you can earn more than you might think over time.

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