Broker Check

The Market Dip Is Good News — Now's the Time to Buy Stocks

| November 15, 2012
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David Kotok


"As the stock market continues to fall from its recent highs, analysts and market pundits are beginning to warn of a bigger crash to come.

After all, there's the "fiscal cliff" to worry about. And Europe. And the potential for interest rates to rise as U.S. debt levels grow. And so on.

You'd be crazy to buy now, these pundits seem to be saying. Wait until all the uncertainty is resolved!

David Kotok, the chief investment officer and founder of Cumberland Advisors, has a different take on the situation.

The absolute worst time to buy stocks, Kotok says, is when everything's perfect. Because when everything's perfect, and everyone feels great about the future, everyone has already bought stocks and stock prices are high.

The time to buy stocks, Kotok says, is when everyone else is fretting and worrying and things look dire. Because that's when stocks go on sale.

Kotok points out that, one way or another, that the fiscal cliff will be resolved within a few months. Europe is an intractable problem, but European leaders will likely continue to find ways to limp along. And even if you assume that earnings in the U.S. will fall, Kotok thinks they won't fall so much that stocks will look particularly expensive.

And that's the short term. Over the long term, stocks are likely to outperform bonds. And there is never a time when it will feel safe and easy to buy stocks.

Yes, stocks could fall far from here, Kotok says. But he, at least, doesn't delude himself into thinking he can call the bottom. And if you have a long-term horizon, you don't need a heroic view of the future to conclude that stocks are attractive."

Howard Erman, CFP®
3020 Old Ranch Pkwy Ste 100, Seal Beach, CA 90740
Phone: (562) 546-6021    
Registered Representative offering securities and advisory services through Cetera Advisor Networks LLC, member FINRA/SIPC. Advisory services also offered through Erman Retirement Advisory. Erman Retirement Advisory and Cetera are not affiliated. All information is believed to be from reliable sources, however, we make no representation as to its completeness or accuracy and all economic and performance information is historical and not indicative of future results. Cetera does not provide tax advice. Investors cannot invest directly in indices.
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