Stocks hit their lowest levels last week. Is it time to buy?

Is this the time to shop for bargains on the stock exchange?

At the end of last week stock markets in America and Europe were trading at their lowest point in decades. Investors stood at the crossroads, facing contradicting signposts, and unable to make decisions. They should:

• Sell everything and abandon stocks altogether.
• Leap in and buy some of the bargains.

A financial earthquake

Last week on the stock exchanges was like being caught in the middle of a financial earthquake. For many, it proved that stocks just aren’t worth the risk, unless you have an inside track of information or some other advantage.

The stock exchange is a mug’s game

Some of the world’s most successful traders and great fans of stock markets admit that the stock exchange is volatile and risky. They have faith in long term investment, but then stocks have to compensate investors for the risk they’re taking and they have to outperform other investment avenues, such as government bonds. Investment managers keep saying if you hang in there, stocks will win.

Well, that’s not what happened last week. Government bonds beat the stock markets even over a 30 year investment. In other words, seen over 30 years, stocks didn’t reward investors for the risk they’d taken. So why play the market at all?

Is it low enough now?

Money can be made on the stock market, but you have to catch the indices when they’re low and sell when they’re high. So the 64 million dollar question is, are stocks at that low level yet?

Are stocks attractive yet?

That depends who you ask. Just last week, during a meeting with British Prime Minister Gordon Brown, U.S. President Barack Obama made a surprising step into investment counseling with a comment that stocks are becoming a “a potentially good deal” for those willing to think long term.

Experts on investments are less certain. Profit multiples have not yet bottomed out, meaning that stock markets could still fall, by a lot.

Obama could be right; this could be a great time to buy. Perhaps this is the greatest opportunity in years! We may look back on all this turmoil in a few years time and realize that share prices had been at bargain-basement levels.

Should I take a Payday Loan so that I can free up some housekeeping money to buy stocks?

How about selling stocks?

I have a few stocks and I’ve had them so long they’ve developed sentimental value. I watch the prices anxiously every day and now I see a pattern. First of all they are at about 40 percent of their purchase price. They creep up to close to 50 percent and then crash to 30. The pattern is quite regular.

I keep thinking that I should sell and take the loss, but something holds me back. Maybe, I think irrationally, they’ll suddenly go up and I will have lost… I’m no longer quite sure what I will have lost. What’s pretty sure is that I am never going to make money out of them, so what am I keeping them for? Talk about confusion reigning!