How safe is the stock market right now?

The stock market has been recovering in recent weeks, with the S&P 500 up more than 11% in the past month.

While there are numerous factors influencing stock market performance, at least part of the reason for this surge could be the Bureau of Labor Statistics’ positive inflation report. According to the report, inflation slowed in July, leading some investors to hope it has peaked.

But whether this bear market is really over is unclear at this point. So is it really safe to invest? Or should you stay away? Here’s what you need to know.

When is the best time to invest in the stock market?

The positive trajectory of the market in recent weeks is promising, but there are no guarantees that it will continue. The stock market can be unpredictable and even the experts cannot predict exactly how it will perform.

The good news, however, is that there isn’t necessarily a bad time to invest. While it can be tempting to only invest when the market is booming, it can be expensive because you only buy when stock prices are highest. By also investing during recessions, you can bring in quality stocks at a discount.

Known as dollar cost averaging, this strategy involves investing consistently throughout the year, regardless of what the market is doing.

Sometimes you will end up buying when prices are at their peak. Other times, you invest when the market is bottoming out. Over time, however, those highs and lows have to be averaged out. Not only does this take the guesswork out of when to invest, but it’s also cheaper than just investing when prices are high.

Is it safe to invest now?

Since there isn’t necessarily a bad time to invest, this could be the perfect opportunity to buy stocks. The market has not fully recovered yet, so many stocks are still discounted.

The most important thing to keep in mind is that investing is a long-term strategy. If the market falls again, your portfolio could lose value – and that’s okay. Short term ups and downs are normal and over time the market has seen positive average returns in the past.

It can be challenging to avoid getting caught up in the daily swings of the market, but a long-term outlook can make this volatility easier to bear. For example, while the S&P 500 is currently down about 10% since the beginning of the year, it has risen more than 200% in the past 10 years.

^SPX Chart

^SPX data by YCharts

By staying focused on the long term, these small daily moves won’t matter much. Even if the market falls again, it will eventually recover.

Keep your money safe

One of the most effective ways to keep your portfolio safe during periods of economic uncertainty is to choose the right investments.

Even shaky stocks can sometimes thrive when the market is rising and the economy is strong, but only the strongest companies will survive a downturn. The companies with the soundest underlying fundamentals are the most likely to weather tough times, and the more of these stocks you have in your portfolio, the better.

Again, no one knows for sure how the market will perform in the coming weeks or months. But if you have a portfolio full of healthy stocks, your investments are much more likely to recover from whatever happens.

It is not easy to invest when the market is turbulent, but it is also not as risky as it seems. By choosing the right stocks and holding them for the long term, you can rest easy knowing that your money is protected in the best possible way.

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