The latest Ben Stein column  on Yahoo! Finance drives home a point that isn’t often mentioned in such turbulent times – when the markets are down, it’s the time to buy. The first few days of 2008 were horrific. The losses equaled half the gains of all of 2007, a pretty compelling statement. Add to that the idea that the first five trading days of the year often signal what will happen the remainder of the year and you have yourself a recipe for disaster for 2008. However, in these turbulent times, Ben Stein offers only these words of advice: “The history of stock market investing is unequivocal on this point: When the market is low, when the economy is in a recession, it is — in the long run — by far the best time to buy.”
I’m 27, I’ve seen the burst of the dot-coms in 2001 and the recovery since. Ben Stein was born on November 25, 1944 so he’s seen his fair share of fluctuations in the economy and if he says long term investors should be looking to buy, then I think I should be buying! Here’s what he suggests: diversified domestic funds like FSTVX (or Vanguard’s Total Market fund) and emerging markets (EEM, ADRE)
Why buy? Why not sit on the sidelines? While it’s great to try to time the bottom, you’re never going to be able to do it. The bottom will come and 1) you’ll miss it; 2) hesitate, thinking the uptrend in temporary; 3) not save entirely! So in this case, investing with a dollar cost averaging strategy probably isn’t a bad idea. I think market timing works sometimes, but it doesn’t work enough to make it a good strategy in the long run.
What do you think? Should we heed Ben Stein’s advice and start buying the post-Christmas sales in the stock market? Or should we take a breather and sit on the sidelines until we retreat back from $100 oil and start seeing a recovery in plunging housing market?