Investments are risky, which is why many people prefer to stay away from them. When you’re young, some discourage you from investing because you don’t know the market well enough, and when you’re older you feel like it’s too late to make a good investment with great returns. In addition, we tend to follow tips that aren’t always useful, such as “the stock market is too risky,” or “find the best companies and buy their stock” or “just buy into the companies that other companies are buying into”. Moreover, we’re still going through a pandemic which may rattle markets, hindering your investments from growing. This brings up a question that many of those interested in investing have asked before, “Is there a right time to invest?”
The straightforward answer to this question is to make your money work for you. It is a popular way for you to create a new source of income and secure a better financial situation for tomorrow. Investment is different from going to a bank and depositing your money in their vault as this time, you’re taking charge of your own financial growth. It’s you who makes the decision on whether to trade, buy or sell your investments. What will you invest in? You’ve a fairly wide range of options including stocks, ETFs, bonds, real estate or even cryptocurrency – which has recently boomed. In order to see greater returns from your investments, you’ve got to wait a while. You can’t invest hundreds and they’ll magically become thousands in a matter of days – but you’ll years. Therefore, make sure you’ve settled all of your big money debt before you put some cash in the investment pool. Given that bigger returns take time, investment isn’t an answer to settling your debt quicker. As previously mentioned, risk puts people off. However, greater risk increases your chances of earning greater wealth. Other than that, you’ve got to consider diversifying your portfolio. Younger investors tend to opt for riskier investments as they have a longer period for their investment to ride out the markets, whilst older investors nearing retirement want to protect their wealth from risk and prefer a lower risk investment option.
Before going into detail, forget all about the myth that only the rich can afford the good investments. Funds that charge the highest fees don’t necessarily give the highest returns. There is no correlation between high fund fees and high returns. There are many well-structured and balanced funds that don’t cost a fortune. A 25-year-old investing £300 a month could be a millionaire by the time they reach 60 (depending on the markets) if they live within their means and save regularly. Investopedia says, “Most investment professionals agree that, although it does not guarantee against loss, diversification is the most important component of reaching long-range financial goals while minimising risk.” * Why should you diversify your portfolio? Imagine investing in just Bitcoin – which has been the top cryptocurrency around. However, if it fails to grow and suddenly loses its value, you’d have lost everything as well. If you’ve got others invested, they’ll keep your profit intact. Experts suggest the following:
- Spread your investments over different geographical regions or market, for example, Asia, USA, UK, Europe, China, Middle East etc.
- Spread your risk over different asset classes, for example, equities, cash, bonds etc.
- Spread your risk over different industries, for example, Financials, Infrastructure, Technology, Property etc.
- You could include crypto currency into your investment portfolio
- You could include property into your investment portfolio
- Look for funds that are already diversified into different geographical regions or asset classes
We now have a better idea of why and how to invest. Is there a right time to invest? Yes! Yesterday, but a better time would have been two days ago or last week. As was pointed out before, investing requires time so the longer you’ve had your investments, the more likely they are to grow. Don’t worry too much about doing it right – just make sure to monitor your investments from time to time and compare your investment choice to its peers. If you find reasons for your chosen investment not to grow more or bounce back, sell it and choose a better performing one. Another factor that potential traders are thinking about is the ongoing pandemic. Should you keep sitting out of the market this year or should you jump in? To get an idea of how the pandemic affected the market, the S&P 500 began a historic decline in February 2020 and was at rock bottom on March 23, 2020. However, in contrast to previous times, the market bounced back in just 149 days. Financial planning expert Marguerita Cheng notes that, “The best way to build wealth is to stay invested, but I know that can be challenging.” Focus on long-term investments and use a calculator to estimate your returns. What you should do before committing yourself is et a knowhow of how stocks work and why they might go up or down.
A word from the experts
Financial planner Andrew Westlin suggests that there isn’t a “best” time to invest in the stock market, and that “In hindsight, we can always look back and see, ‘Oh if I had waited a week, if I had waited a month, would I have better returns?’ But none of us have that [ability to go back]. Just having the opportunity for market growth is what is most important.” Fortunately, you can worry less about your investments and still get your returns whenever you want. You can speak to an adviser and discuss your plans and targets and see what the best way forward will be. The best part about such a meeting is that the plans and investments will be set to meet your goals.