Dentons Wealth | The Right Time to Invest

Firstly, is there a bad time to invest? ‘Yes, the market is too high. Our strategy is to buy low and sell high.’ Rather than fretting about when is the right time to be investing, think about how long you are planning to keep your money in the markets. Different investments offer varying degrees of risk and return, and each is best suited for a different investment time-frame.

Questions to ask yourself

When will you need the money?

The longer your investment horizon, the greater risk you can accept, since you will have more time to mitigate any potential volatility synonymous with market investment.

If you need the money within the next five years, you may be best advised to remain in cash. The message being, the sooner you need the money, the less you can afford to lose. This isn’t without risk either as with interests rates still remaining very low, especially in comparison with the growing cost of living, the buying power that your cash has, will, over time lose value in real terms.

On the other hand, the markets can be a very attractive option for long-term goals like saving for school fees and retirement. The potentially higher returns with market investment can simply be too good to discount.

When to sell

Some investors believe they can ‘time’ the market, accurately predicting when it will rise and fall. As a result, they counsel selling when the market is about to fall, and buying when the market prepares to rise. Unfortunately, if investing were that easy, these same investors would be sunning themselves on the beach, rather than trying to sell their timing methods to other investors.

Granted, when overall economic woes begin to hit, you might consider selling. However, beyond that very general scenario, an accurate system for timing the market remains an investor's pipe dream.

Many mutual fund investors are quick to withdraw their cash when returns turn sour but several academic studies have proven that investors who jump from one fund to the next, chasing performance, tend to do vastly worse than those who stay put. So, be prepared to stick with your investment through good times and bad.

Don't listen to the noise

The media pays meticulous attention to the FTSE100 and this assumes that it reflects the entire market. Index goes up? The market is bullish! Index goes down? Here comes the bear market! Index yo-yos back and forth?

Now the market is volatile!

Some investors, particularly those keen on technical analysis, study the ups and downs of market graphs to gauge whether investors will take the market higher. For most investors, this is an exercise in futility. Successful investing relies not on monitoring the market as a whole, but on analysing strengths and weaknesses. Whatever the market's doing at the moment, a buy-and-hold approach to investing is the best way to earn reliable long-term returns.

Review

Of course, you can't just load your portfolio with a few funds - however well-chosen - and forget all about them. Investments need regular care and attention to flourish. You need to check your investments regularly to make sure they are performing and doing so more substantially and less expensively than other, similar options.

Reviewing your investments, particularly when you may have made mistakes, also offers a crucial opportunity to learn from your mistakes. Everyone makes errors now and then, but most successful investors avoid making the same mistakes twice. Set aside time to review your portfolio on a regular basis. Whilst you should not be glued to the computer screen, tracking your investments minute-by-minute, day by day, don't forget them entirely, either.

This article does not constitute investment advice and we always recommend you should seek financial advice before making investment decisions.

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The right time to invest