Is now a good time to buy stocks?

I get this question a lot: "Is now a good time to buy stocks?"

It's actually pretty easy to answer this right now. But first you have to ask yourself a few questions: 

1) Do I need the money I would be using to buy stocks? Your answer should be no. If you are planning on using this money for a down payment on a house in less than 5 years, then you should not be buying stocks with it. If you need to live off this money and couldn't afford to live your life without it, then you should not be buying stocks with it. Stocks are risky and you could lose every cent you put into them (not the most likely scenario, but a possibility that you can't completely ignore). Another way to phrase this question would be "Do I have a long time horizon of 20-30 years?"

2) Do I understand the difference between investing and speculating? Most people do not. If you want a good explanation, read The Intelligent Investor by Benjamin Graham. (I actually own this version of the book, which is hardcover and will hold up better over time, but the one I linked to first is cheaper.)

3) Do I have the time and skill to research individual stocks? If your answer here is "no", this does not rule out stocks as a whole but to me it would rule out purchasing anything but a small amount of individual stocks. Instead, I would personally invest in index funds and look for the lowest fees possible.

You'll notice I didn't mention anything about the market. This is because I don't know if it is high or low right now as compared to where it will be in a couple of months or years from now. I do know that equity investments look more attractive to me (and to Warren Buffett and Scott Adams) than they did a year ago, but I'm not going to make any forecasts.

And yes, the rumors are true: you have me to thank for the recent market declines. One of my 2006 year-end wishes was for lower stock prices in 2007 and although it took until 2008 for the market to fully grant it, my wish was fulfilled. Thank you, Mr. Market. You really helped my retirement years by allowing me to buy your shares so cheaply in 08 and hopefully for the next couple of years as well.

Please invest responsibly.

Oh, and for the majority of my readers who rely on a salary like me, you should worry more about your job than where you invest your money. Now is not the time to be slacking off at work trading stocks when you should be working to dodge the next round of layoffs. That said, there are some great bargains out there.