Should you invest before the end of 2023 or wait until the new year? Here’s what Warren Buffett had to say:

As investors evaluate and rebalance to prepare for the stock market in 2024, the question on everyone’s mind is whether to buy now or wait. that much S&P 500 An attempt was made to enter a bull market, but persistent inflation, resulting high interest rates and the resulting retail crisis left investors insufficiently enthusiastic about the potential for the new year.

When you need some serious investment wisdom, it’s always a good idea to pull out some wise advice from the legendary Warren Buffett. Let’s see what he has to say about the right time to invest.

Don’t wait for a bull market

As we stand on the edge of a bear market, one thing Buffett cautions against is not to get caught up in the bull market hype. “What could be more exciting,” he admits, “than participating in a bull market in which the rewards for business owners are gloriously decoupled from the steady performance(?) of the business itself?” “But unfortunately, stocks cannot outperform companies indefinitely.” Buffett constantly urges investors to focus on business fundamentals that will lead to stock performance over time, as opposed to stock hype, which will eventually fade away.

With many valuations still low, now could be a good time to invest. When the bull market returns, you’ll want to avoid unreasonably high valuations. If you can’t find an undervalued stock, Buffett will tell you not to buy it at all. “When the conditions are right,” he wrote in a 1986 shareholder letter, “when a company with good economics and good management sells for well below its intrinsic business value, stocks sometimes deliver grand slam home runs. But we have not found one at the moment.” He said. “It almost passed our tests.”

Image source: Getty Images.

In fact, Buffett and his team haven’t been buying too many stocks recently and have been net sellers of stocks over the past few quarters. One of the reasons may be the high interest rates. Berkshire Hathaway (BRK.A 0.43%) (BRK.B 0.83%) You can earn a decent amount of interest on your cash, keeping it ready to purchase the right stocks when the opportunity arises.

Also keep in mind that when people talk about Buffett’s portfolio and what he buys and sells, they are usually referring to the holding company, Berkshire Hathaway, rather than the individual portfolios. Buffett freely gives great advice, but the right move for a holding company with billions of dollars of capital and ownership of several entire companies may differ from the right move for an individual portfolio.

Will the stock market rise or fall in the new year?

Here’s a simple test to see if it makes sense to make a purchase before the end of the year or at the start of the new year. This is a chart showing the performance of the S&P 500 over the past five years. At least in recent years, we can see that there is no clear pattern to how the market moves until the start of a new year.

^SPX data from YCharts

One thing to note is that despite several declines, most notably the 2020 crash, the S&P 500 continues to recover and rise again. That is the power of long-term investment. It doesn’t matter when you buy it. The key is to get into the market when you can, buy stocks when the market presents opportunities, look for the right ones when you buy them, and hold them.

Just keep holding on

One of Buffett’s most quoted sayings is that his favorite holding period is forever. In full context, here’s what he actually said: “When you own part of a great company with a great management team, our favorite holding period is forever.” “There are only a few businesses in which we have long-term confidence,” he added. he definitely ~ no I advise you to hold all your stocks forever and always sell them. He’s imploring investors to be discerning about which stocks they buy to reduce the chances of having to sell.

If you have the cash to buy stocks after building up your emergency fund and paying off debt, and you can identify good stocks to buy at appropriate valuations, now is the time to buy. If you are undecided about which stocks to buy for your portfolio needs, wait until the right opportunity presents itself, and not just in the new year.