Should You Be Buying Stocks Right Now?

Stock market gurus say now is the time to pick up some great stocks at a low price. Warren Buffett says he's increased his holdings substantially in the US stock market, but for the individual investor, does today's market represent an unbeatable deal?

The rules about stock market investing haven't changed. If you know little about investing in stocks, it's never a good time to invest. Instead, take some time to learn about the stock market, and what buying stocks mean before you head to the stock tables to make your picks.

There's nothing guaranteed about investing in the stock market. The old saw about past performance not being a guarantee of future results is as true as it has ever been. Few, if any, sectors are unaffected by the recession, and even the players in stronger sectors may have unrecognized vulnerabilities that will drop the price of their stocks overnight.

The first rule of investing, therefore, is don't put any money in the market that you can't afford to lose. If you're thinking about investing your life savings in stocks, check that plan. Just as you shouldn't put all of your eggs in one basket, you shouldn't put all of your savings into one stock, or one type of investment. If you're serious about making your money grow, go back to the drawing board and learn how to balance your risk in the stock market by picking up other types of investments, too.

The second rule of investing is know what you're buying. Some people buy stocks on a strictly emotional basis. They like the company or its products, so they buy stock. Other people end up as stockholders by virtue of being employed by the stock issuer. As a rule, emotional investing isn't a very good idea. You run the risk of making a bad purchase decision, and compounding it by holding onto the stock longer than another investor would.

Always look at how you can limit your risk. If you're accumulating company stocks – as you might in a retirement plan – the safer bet is to limit the amount of company stock you own. If you lose your job or the company shuts down, you could also lose a substantial chunk of your retirement savings.

All this having been said, there are some great deals to be had in stocks right now, if you have the stomach (and the cash) to invest. Short-term investments aren't the right tool for most investors, but you can put together a nice, balanced portfolio for longer-term goals at a pretty good discount right now.