Should I invest today or wait for a stock market crash?

A question that family and friends are asking me regularly these days is whether I should continue investing or wait for a stock market crash to really get started.

But I don't think that's the most important question. Let me explain.

Everything priced in?

Some markets – and certain sectors within those markets – definitely look overheated. The US is an easy target, especially with giants like NVIDIA (NASDAQ: NVDA) in its arsenal. The latter's shares are up 150% in 2024 alone.

It's not that this performance is unjustified. The company has proven that it regularly beats analysts' forecasts. In fact, investment bank Goldman Sachs has already stated that it expects this to happen again when the chipmaker presents its quarterly results in August.

The conclusion? Betting against Nvidia – and the history of artificial intelligence (AI) – doesn’t seem to be paying off.

But a small voice says there has to be a big pullback at some point. That's what happened to the (overvalued) tech titans in 2022. And if I had bought some or all of the Magnificent Seven back then, I'd probably be a happy bunny in 2024.

So I completely understand the hesitation to invest new money in Nvidia or the markets in general. It's all just gotten a little too… comfortable.

It's better to have a nice pile of cash in case things go wrong, right?

Keep calm, carry on

The problem is that nobody really knows when that will happen. Not finance professors, not City traders, not even ordinary fools like me.

In such a situation, logic dictates that we should not try to predict the top (or bottom). If I believe in the long-term prospects for stocks, I guess it's better to just keep going.

I'm sure those who have had the courage to buy (and hold on to) Nvidia over the past few years are probably glad they did, even though the company has always looked expensive by any traditional valuation metric.

It's also worth remembering that sentiment isn't just driven by earnings reports and company fundamentals. Regardless of current valuations, a drop in interest rates could be enough to send markets (and Nvidia) even higher in the second half of 2024.

Know yourself

Instead of engaging in exhausting speculation, I can think of a better question to think about my portfolio: Can I stick to my investment strategy no matter what happens next?

If the mere thought of my ISA losing value by a double-digit percentage makes me nervous, I may have misjudged my risk tolerance. That explains my “indecisive” reaction earlier. The same would apply to any individual company share.

The story continues

In such a situation, some adjustments may be appropriate. And soon. This could include buying assets that are not typically correlated with stocks, such as bonds.

I'll do it

Personally, I am happy to continue buying shares on a regular basis. I am also happy to maintain my exposure to Nvidia through several funds, including Scottish Mortgage Investment Fund.

Why? Because I plan to stay invested for at least a few more decades. And studies regularly show that stocks outperform anything else over that time period.

If I get the opportunity to add shares at a cheaper price in the near future, so be it!

The post “Should I invest today or wait for a stock market crash?” first appeared on The Motley Fool UK.

Further reading

Paul Summers owns shares in Scottish Mortgage Investment Trust. The Motley Fool UK has recommended Nvidia. The views expressed on companies mentioned in this article are those of the author and may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool, we believe that considering a diverse range of insights makes us better investors.

Motley Fool UK 2024