Are you thinking of investing in the stock market, but don’t know when is the right time? You’re not alone. Many people are wary of investing during volatile times. So, how do you decide when it’s the right time to invest? Let’s take a look at some factors to consider.
80/20
In many aspects of life and learning, 80% of the results come from 20% of effort. It is helpful to keep the Pareto Principle in mind when starting a task that encompasses a vast amount of information. The “80/20 rule” is named after economist Vilfredo Pareto.
Roadmap
Taking a close look at your entire financial situation before you make any investment decisions is crucial, especially if you have never made a financial plan before.
Finding out your goals and risk tolerance is the first step to successful investing – whether you do it alone or with a financial professional. Investing doesn’t guarantee you’ll make money. With the right knowledge and an intelligent plan, you can gain financial security and take advantage of managing your finances over the years.
Risk
Evaluate your comfort zone in taking on risks. Risk is inherent in all investments. Before investing in securities, such as stocks, bonds, or mutual funds, you should understand that you may lose some or all of your money.
Timeline
Commit to leaving those investments untouched for a set period of time. With a long-term plan, it is possible to expect a reasonable rate of return. It’s more likely for investments to weather equities market fluctuations when they have a long time to appreciate.
It may be possible to generate a return in the short term, but it’s not probable.
Compounding
Take advantage of compounding by leaving your investments untouched for several years.
People often refer to “the snowball effect” as the power of compounding. Compound growth occurs when your investments begin earning money on their own. Early investors can outperform late investors because of this. In this way, they get the benefits of compounding growth over time.
Asset classes
An investor can help protect against significant losses by including asset categories that fluctuate under various market conditions in their portfolio. In asset allocation, you divide your investment into several types of investments, each representing a certain percentage of the overall investment.
Managing risk isn’t the only reason to choose among various asset classes. Diversification yields greater rewards.
Create/maintain an emergency fund.
A smart investor saves enough money to cover an emergency, like unemployment. Many people make sure to save up to six months of their income so that they know they can rely on it when they need it.
Pay off high-interest debt.
You will never find a more effective or less risky investment strategy than paying off high-interest debt. No matter what market conditions you are in, paying off your high-interest credit card balance as soon as possible is the wisest thing you can do.
Stay alert
It can be tempting to jump on a bandwagon when it seems like everyone is getting in on the latest and greatest investment opportunity, but scam artists read the headlines too. Often, they’ll use a highly publicized news item to lure potential investors and make their “opportunity” sound more legitimate. The best way to protect yourself from these schemes is by asking questions and checking out the answers with an unbiased source before you invest.
To conclude
You should never feel rushed into making an investment. If you take the time to learn about all your options and consult with people you trust, you’re much more likely to make a wise decision that will benefit you for years to come. And if you’re still feeling lost or unsure, don’t hesitate to reach out, SJB’s team of professionals are happy to answer any questions and guide you in the right direction. There’s no need to go it alone!
