The Best Time To Invest
by Justin Vencel
Saturday, May 19th, 2012
We talked about this topic a bit when we went over the reasons why you should invest in a previous article. If you are worrying about when to invest, right now may be one of the best times in the last decade to get started in the market. So long as you stick to a long-term investment strategy one could argue there is no bad time to start investing as you can see by the average return of the S&P 500 for the past 50 years.
"Our favorite holding period is forever." ~ Warren Buffett
Inflation is your enemy.
You may think to yourself, "if I don't invest in the stock market, I can't lose money", and with all that's been going on in stock market over the past year I can see why people might ask this question. I'm going to tell you why this is a mistake. Socking away your money in a mattress may keep you from silly investment mistakes but it won't protect you from inflation. Inflation works against you everyday by making your hard-earned cash worth less and less. According to inflationdata.com, the average inflation rate for 2008 was 3.85%. So what, you ask? This means if you had $100 in your wallet on Jan. 1st 2008 it would only be worth just over .96 cents by December 31st because of inflation. By doing nothing, you have actually managed to lose money. This is why it is so important to offset your losses to inflation by making your money work for you, whether is be in a bank account or an investment in stocks or bonds.
Get In Early
Every day you are not putting you money to work, you give a bit of it away to inflation. The key is to find the type of investing that you are comfortable with. Don't just start buying random stocks, or the hot stocks if you are not comfortable doing the needed research first. There are many other great choices out there like select index funds, mutual funds, and Cd's that will keep your exposure to risk low and provide a decent return.
Market Timing
Trying to guess what the stock market is going to do next is impossible. What you should concentrate on is making long-term investments that make sense. If you are worried about when to buy, think about using dollar cost averaging to offset any worries about timing.
“If I have noticed anything over these 60 years on Wall Street, it is that people do not succeed in forecasting what’s going to happen in the stock market.” ~ Benjamin Graham
Asset Availability
A long term approach to investing will help to smooth out the inevitable rough patches that stock market has historically gone through. But what if you need that money in the next year, or five years? Maybe a less risky strategy is what you are looking for. Putting this needed cash into US Tresury Bills, CD's (certificates of deposit), money markets, or high yield savings accounts can help keep your exposure to risk very low yet help to combat inflation by earning a modest return.
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