This post was published on March 18, 2020 when the stock market was falling apart. My goal was to help people feel more calm by going through a logical analysis of predicting when the bleeding would stop. I also provide an update on what my views are on stocks at the end of this post.
Are you wondering when the stock market will bottom? So am I!
When there is stock market pandemonium, there tend to be a lot of worst-case scenarios thrown around e.g. zombie apocalypse with no food, electricity, or running water. Because of the hysteria, the stock market tends to both overshoot on the upside and on the downside.
As rational investors, we acknowledge that nobody can with certitude predict a stock market bottom. However, it’s worthwhile to at least think about various entry points to put additional capital to work if you are a long-term investor.
As long as we have excess cash flow, we can either hoard cash or make an investment. I tend to consistently do the latter since my cash allocation is generally at capacity.