Because You Asked: How Do I Decide When to Invest?

The answer or answers to this question can be very situation-specific, and we often take a number of factors into account when making recommendations for our clients to invest.  But I will make an attempt at more general recommendations, especially for new investors who are just beginning the process of accumulating wealth.

One of the first rules of thumb is to invest money that you do not otherwise need.  So, you would never invest funds that you will need to pay your bills, or your emergency cash fund.  We have talked in previous blogs about investing in employer-provided retirement plans of various types or in IRA’s or Roth IRA’s, and those investments should already be established.

But let’s suppose that you have money to pay your bills, a nice emergency savings of between three and six-months living expenses tucked away and you want to invest more, because the money you put into a bank/checking/savings/money market is not going to grow.

Once you have accumulated a little pile of money to invest, say between $2,500-$5,000 or so, you can open an investment account at any number of low-cost, do-it-yourself online investment providers: Schwab, Vanguard, Fidelity, TD Ameritrade, etc.  These are frequently referred to as “Robo-Advisors”.  You can select what is known as an index fund such as the S&P 500, or perhaps there are one or two companies in whose stock you want to invest and hold over time.  Select something that you like, and stick with it.  We do not recommend engaging “day trading” or buying and selling very often.

You will want to reinvest any dividends that are paid as a result of your investments, and continue to contribute regularly to your investment fund.  We recommend that you set up an automatic investment, just like you do with your auto bill-pay.  The goal is to simply get the process started, and then continue to regularly invest.  These funds are not going to be tied up, or have what is known as surrender charges, but do your absolute best to avoid touching them if you can.  The key element to building wealth is TIME, and if you start early and contribute regularly, you will go a very long way toward accumulating your own wealth.

For investors that are already working with an advisor, you too can choose to invest systematically or regularly, and also have the option to look for specific investment opportunities.  These opportunities can happen when markets have a downturn or when you hear the TV pundits referring to a “market sell off”, because these terms can also mean that there are bargains to be had, and certain investments may be On Sale!  These sell-offs can be a great time to invest, though it is also typically when some investors get nervous.  Talk with your advisors in advance, so that you will be prepared for these opportunities.

In summary, the best time to invest is now.

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