When is the right time to invest?

As the world seems to teeter from one economic disruption to the next, the resulting uncertainty has everyone questioning their investment strategies. For anyone who is fully invested for a booming market, the prospect of a significant decline could be frightening, especially when those investments are a worker’s life savings and intended for retirement. For those waiting on the sidelines, jumping in with the wrong strategy brings the risk of losing big on the investment.

While jumping into the market right when it hits bottom would be ideal, being able to perfectly time such a move is incredibly unlikely – and trying it can have you missing out on growing your nest egg. This is because, in spite of how the market has performed in the past, it can always behave differently going forward. The speed of a market crash or its recovery can be painstakingly slow or dramatically swift. They can be foretold by technical data or begin without warning. Even more confusing, markets can rise when we expect them to fall – and fall when the headlines suggest they should rise. Plus, we simply don’t know what additional uncertainty tomorrow could bring.

Because of this unpredictability, and especially as world events create volatility in the market, it’s only natural that people are questioning once again when to make an investment move. In an ideal world, you would make an investment at the market’s low and sell it at the market’s high. In the real world, we know that such magical feats are few and far between.

So, when is the right time to invest? As long as you are a long-term investor, the answer is “now.” The key to investing successfully now, in every upturn and downturn, is sticking with it and making adjustments along the way. Here are some strategies and factors to keep in mind.

Consider your investment goals and time line.

What investments you make should be a reflection of your goals. Only when you have long-term goals should you invest in anything that has the potential to lose value, like stocks, bonds and mutual funds. If your investment declines in value in the short term, it will most likely have time to rise in value and provide an overall return for your long-term goals.

If you invest in stocks for an important short-term goal and the stocks’ value declines, you will not be able to meet your goal. For this reason, if your goals are for the short term, you should take a much more conservative approach, using certificates of deposit and other fixed-rate solutions. Here at United Community, for example, we offer certificates of deposit at fixed rates for terms from 6 months to 5 years, making it easy to select one for your specific needs.

No matter what your investment – whether stocks, bonds, or a fixed-rate CD, your returns are greater when you give your investment time to grow.

Wade in gradually.

Because no one truly knows what the markets will do next, it’s best to take a gradual approach to investing. Investing over time is called “dollar cost averaging” and helps you offset losses associated with an investment purchased at a market’s high.

To illustrate, let’s say you have $5,000 to invest and you put it all into a particular stock. Over the next four months, the stock rises by 10% and then declines to 20% below what you paid for it. Across the street, your friend also has $5,000 to invest and made a $1,000 investment the same day you invested. Each month, she put in an additional $1,000. Her second investment is made at the top of the market, so she’ll experience steep losses with that purchase – but her third and fourth investments are made close to the market’s bottom. In the long term, as the stock’s value rises again, your friend’s returns will be greater.

You can even use this same strategy with certificates of deposit and bonds during times of interest rate volatility.

Diversify.

Even if you’re a hard-core stock investor, diversifying either with the help of mutual funds or hand-picked investments is essential for a portfolio that can withstand the shocks of a volatile market. Any good diversified portfolio contains secure, fixed-rate solutions, such as high-yield savings accounts or certificates of deposit.

Your helpful team at United Community can help you make a safe and sound savings investment right now. Stop by your favorite branch or give us a call at 713-674-5778 for assistance.