‘Fall is your friend’: Why some advisers tell young investors to buy stocks, despite stagflation fears roiling markets

How low can stocks go? This question has investors on edge as they fear one bottom after another.

The answer: pick a number. Some analysts say prepare for more fallsothers wait for a bounce.

Wall Street is nervous about the prospect of stagflation, the double-edged sword of prolonged inflation and high unemployment, as the Federal Reserve tries to fight inflation by raising interest rates without pushing the economy into recession.

Anh Tran, managing partner of Orange, California-based SageMint Wealth, has some advice for young investors who have time before retirement: “These are the times when we need to take advantage of market volatility and continue to invest.”

She was speaking on CNBC’s “Own Your Money Before it Owns You.” event on Thursday.

Why? Generation Z and millennial investors have 25-30 years to recover from another fund.

“A dip is your best friend, so buy the dip, take advantage of prices being low right now, and don’t try to time the market,” added Paula Pant, host of the podcast “pay anything”, also at the event.

“These are the times when we need to take advantage of market volatility and keep investing.”


— Anh Tran of SageMint Wealth

Buying the dip or “BTD” isn’t always as simple or as smart a move as it might seem, as Jon Burckett-St. Laurent, Senior Portfolio Manager at Exempt Wealth Advisorswrote in MarketWatch in April.

With the CPI hovering around 40-year highs, hitting 8.3% in April, he said central banks may not be as eager to step in with aggressive rate cuts or keep additional money flowing with bond purchases through so-called “quantitative easing”, especially in the event that economic growth slows down significantly.

“The next problem with BTD is that a realistic strategy requires more detail than ‘buy when the price drops’.” he wrote. “Some questions to consider: What constitutes a dip? What money are we using to buy? When do we sell?

Instead, Burckett-St. Laurent recommends what he calls a “tactical rebalancing” to, say, 80% stocks and 20% bonds, and once the market has recovered and fundamentals look more secure, go back to 60% stocks and 40% bonds. % bonuses.

He also suggests waiting for blood in the streets. “If stocks drop 50%, it may constitute a sentiment-driven overreaction,” she added. A 3%, 5%, or even 10% drop isn’t exactly a “generational buying opportunity,” she added.

‘Some questions to consider: What constitutes a dip? What money are we using to buy? When do we sell?


— Jon Burckett-St. Laurent, Senior Portfolio Manager at Exencial Wealth Advisors

Still, a recent survey by the personal finance site Bankrate shows that 43% of investors aged 18 to 25 said they are ready to increase their investments. More than a quarter, 27%, were millennials ages 26 to 41.

But only 14% of investors aged 41 to 57, the so-called Generation X demographic. And only 8% of baby boomers, ages 58 to 76, said they would likely invest more in the market this year. 22% said they would invest less.

Even those younger investors may now be less confident in buying the dip. The new survey was conducted a month ago, before the stock market crash on Wednesday. before the nerves of inflation.

The Dow Jones Industrial Average DJIA,
+0.03%,
the S&P 500SPX,
+0.01%
and Nasdaq Composite COMP,
-0.30%
everything dipped back into the red on Friday, after briefly holding in positive territory earlier in the day.

The Dow Jones and S&P 500 closed Thursday at its lowest level since March 2021. The Dow Jones is on track for a weekly decline of 2.3%, which would be its eighth straight and the longest since 1932, according to Dow Jones Market Data.

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