Strategies for Smart Investing as the TSX Continues to Rise

If you’ve been just waiting for the TSX Index to enter a bear market or deep correction (let’s say between 13-19%) before putting money to work on stocks, you might be waiting around for a while longer. And this latest vicious melt-up rally since Iran war fears peaked might inspire you to chase, even with markets at fresh new highs.

There’s no telling when the next correction in the TSX Index could happen, especially as it looks set to stay a bit hotter than the S&P 500. With serious momentum behind the financials (banks and insurers) and plenty of promise from the energy names and basic materials plays, I continue to find the TSX Index a great place to hunt for value and yield.

Of course, you won’t get as much tech in the Canadian stock market. For that, you’ll need to look south of the border to some of the big-tech and AI darlings, which I also find to be quite intriguing after the first-quarter sell-off.

Either way, investors should try to take their emotions out of the equation when considering putting new money into markets. It sounds cautious and shrewd to wait for better prices before backing up the truck.

Value investors know well the dangers of paying too high a multiple for a stock. At the same time, though, there’s also risk in staying sidelined for too long, especially as another wave of inflation looks to hit the economy.

How to buy with markets at a fresh high?

It’s hard to get around the blocks that value investors might face when stocks are at new highs, especially since a great buying opportunity has just passed us by.

While chasing might seem like a dangerous move, especially given the risks that could derail the latest V-shaped bounce in the TSX Index and S&P 500, I think thinking long-term and getting started, regardless of the near-term outlook, is the move.

Even if you buy and we revisit the year-to-date lows, you’ll probably still be well ahead in 10 years, and especially in 20 years. In fact, such a dip probably wouldn’t even be visible on the longer-term chart in a few years down the road. If you’re nervous about corrections and are hoarding cash, perhaps it’s a good idea to expect a reversal (yes, even into a correction) to happen after you’ve bought.

The reward of long-term compounding might come with a price: having to feel the pain of a market dip. As an investor, you’ll have to pay that price many times and should get used to it.

Timing the market is nearly impossible. Instead, investors should focus on capturing stocks that trade at a fair or cheap multiple with strong fundamentals.

And, of course, buying the market, with something like Vanguard FTSE Canada All Cap Index ETF (TSX:VCN) could make sense, especially if your brokerage lets you buy ETFs on the house! It’s these free, liquid index ETFs that can allow you to nibble your way into a position over time.

In terms of dollar-cost average (DCA) candidates to help investors get past the fear of buying the high, the VCN, which is a fantastic way to bet on Canadian stocks, is a great start. It could keep climbing, but if it slips, you can just keep adding to a position, lowering your cost basis, and supercharging your rebound prospects.