With the S&P 500 at 4,200 as of Aug. 25, that might imply it might drop one other 14% by the tip of the 12 months, on high of the 12% it’s already down. And the Nasdaq Composite is already in bear market territory, down about 20% 12 months to this point as of Aug. 25.

That is to not say Financial institution of America’s forecast can be appropriate. The market may surge greater the remainder of the 12 months. However the uncertainty has brought on many traders to take a seat on the sidelines and look forward to the market to show again north. It raises the query: Must you actually be shopping for shares proper now? Whereas it’s prudent to be cautious, it’s also sensible to be opportunistic. This is why.

You don’t have any doubt heard the well-known Warren Buffett quip: “Be grasping when others are fearful and be fearful when others are grasping.” That’s simpler stated than carried out for the common investor, however the bigger level is, down markets are a good time to search out good, low cost shares that can develop and flourish when the market does flip round.

As Buffett himself instructed The New York Occasions again in 2008: “Unhealthy information is an investor’s finest pal. It helps you to purchase a slice of America’s future at a marked-down worth.”

A few of Buffett’s finest and most profitable purchases got here in down markets. Buffett purchased Berkshire Hathaway‘s second-largest present holding, Financial institution of America, in August 2011 when it was buying and selling at round $6 per share. It’s now buying and selling at $35 per share — although it’s down 21% 12 months to this point. Nonetheless, that funding has posted a 17% annualized return for Buffett.

Now, not all traders have the experience or observe report of Warren Buffett, however simply as there was after the Nice Recession, there are quite a lot of good shares out there at low valuations proper now, if the place to look.

The very first thing to know is that bear markets don’t final so long as bull markets. In keeping with an evaluation by the Hartford Funds, the common bear market lasts about 289 days, or simply over 9 months, whereas the common bull market lasts about 991 days or 2.7 years. Additional, shares on common lose 36% throughout a bear market and achieve 114% in a bull market.

Additionally it is value noting that about half of the S&P 500’s finest days within the final 20 years occurred throughout a bear market, whereas one other 34% occurred within the first two months of a bull market. So, there’s certainly worth in including to your present or investing in new shares.

However proceed cautiously, as there stays quite a lot of uncertainty on the market. Your finest wager is to search out firms which have seen their valuations drop, as measured by price-to-earnings (P/E), price-to-book (P/E), or price-to-sales (P/S) ratios. Additionally, search for firms which might be established of their industries or markets with a historical past of constant earnings and income will increase.

Typically talking, shares that also have excessive valuations, a disproportionally excessive quantity of debt, comparatively little money move, excessive bills, and a spotty historical past of profitability or earnings ought to increase crimson flags.

So, sure, you need to be seeking to put money into shares proper now, however proceed cautiously and do your analysis.

10 shares we like higher than Financial institution of America

When our award-winning analyst crew has a inventory tip, it could pay to hear. In any case, the publication they’ve run for over a decade, Motley Idiot Inventory Advisor, has tripled the market.*

They only revealed what they imagine are the ten finest shares for traders to purchase proper now… and Financial institution of America wasn’t one in all them! That is proper — they assume these 10 shares are even higher buys.

*Inventory Advisor returns as of August 17, 2022

Financial institution of America is an promoting companion of The Ascent, a Motley Idiot firm. Dave Kovaleski has no place in any of the shares talked about. The Motley Idiot has positions in and recommends Berkshire Hathaway (B shares). The Motley Idiot recommends the next choices: lengthy January 2023 $200 calls on Berkshire Hathaway (B shares), quick January 2023 $200 places on Berkshire Hathaway (B shares), and quick January 2023 $265 calls on Berkshire Hathaway (B shares). The Motley Idiot has a disclosure coverage.