As the world is in the middle of a pandemic, the stock market has seen high levels of volatility. Existing investors keep on asking themselves if now is the right time to sell, while new investors are wondering if now is the perfect time to invest.
Unless you have no emergency savings or have high-interest debt, then it is always a good time to invest in the stock market whether it’s your first time investing or you are looking to reallocate your portfolio.
The reason behind this is that the stock market has historically increased. This means that even if you have a bad year, you are more likely to earn back your losses over the next year or two. Secondly, the longer you keep your money in the stock market, compounding interest benefits you more.
Even though the stock market is complicated and presents the risk that you will lose money, the longer you keep your money in the stock market increase your likelihood of a solid return on your investment.
In my opinion, it is always the right time to invest. No one knows how the stock market will perform. Trust me, if I did, I wouldn’t be working full time. I would be off on an island somewhere.
The best thing you can do is understand the basics of the stock market and what drives it. You will never be able to time the top and the bottom of the market. If you do, this will drive you insane and will result in you missing out on buying opportunities.
While I do invest when the market increases, most of my investing are done when the market declines. This is the strategy that lets me take advantage of dollar-cost averaging.
Dollar Cost Averaging
What is dollar-cost averaging? This is when the total about you invest is purchased over a set period to reduce the price volatility In your portfolio. A good example is you invest $100 every month, no matter the price. The table below breaks down the dollar cost averaging over a year.
This is the easiest way of investing for any investors. I use this strategy a lot when the market is declining because I never know when the market will bottom. This strategy allows you to make sure you can take advantage of any market dips that present valuable opportunities.
While now is always the best time to invest, always remember to think long-term, have well-defined goals, understand your risk tolerance, and always diversify your portfolio.