As we know, most investments have good weeks … and bad weeks … good months … and bad months.
So, how do you pick the right time to invest?
And what other factors do you need to consider when thinking of jumping into a new investment opportunity?
The single thing that will have the largest effect on your long-term profits
There’s one crucial variable that will have a meteoric effect on your long-term profits.
You might be investing in a method that brings you 50% gains …10% gains … or 2% gains … yet this variable will be the difference between a little extra cash in your pocket, and serious wealth.
And too much time is wasted by investors worrying about whether now is the “right time” or the “wrong time” to get in.
If you’re concerned about buying a stock and its value falling in the near-term, then scale in … buying 25% chunks over the course of a few months. The same can be done with any investment method, buy starting with a small fund and building that steadily.
But there can still be obstacles that prevent us from “jumping in” immediately …
Do you have the time to devote to it right now?
It would be a mistake to embark on a brand-new investment program that’ll take up a lot of your time, when you’re really busy. If you can’t devote the time it demands, you’re dooming yourself to failure from the outset.
However this doesn’t mean that you have to sit on the sidelines. There are plenty of methods that take up minimal time … whether it’s just 10 minutes a day, or half-an-hour once a month … And you shouldn’t view these methods for the time-poor as inferior investments. In fact, hands-off investing is often the most successful form (the methods that have us sat in front of or screens for hours a day leave a lot of scope for us to make errors!)
Is it the wrong time of year?
Of course, warm weather, summer holidays rolling in … aren’t you meant to “sell in May and go away?”
The “sell in May” advice is for investors looking to hold shares over a period of months (summer months tend to make less money than winter months). Yes, the summer does have lower volumes than the rest of the year, but that’s not necessarily a bad thing for strategies that rely on a bit of volatility.
Are you about to go on holiday? Does that matter?
There are methods that won’t cope well with us disappearing to a Greek island with no internet connection for 2 weeks! But that doesn’t mean the holiday season can’t be a profitable one.
Many trading methods can be simply closed down and put on hold while we’re on holiday – ready to pick up as soon as you get back.
Do you have the money to invest?
Of course, it’s impossible to invest money if you have none to invest. But how much do you really need to get started?
Some investment methods aren’t worth considering unless you have several thousand to put aside, but there are other ways to get on board. For example, the method I’m launching just next week enables you to start out risking just £3!
And, even if you do have a large fund, I’d always recommend that you start out small, building slowly.
Are you being distracted by noise?
Noise takes the form of those little wobbles on our charts – the ups and downs within an overall trend. And there are two types of noise that can cause us to hesitate … the ups and downs of the market, and the ups and downs in the performance of a strategy.
The ideal is to get on board just as profits head up …
Of course, no one knows exactly where these turning points will be, so we have to rely on following trends. Look for what’s doing well right now … consider what kind of ups and downs it’s been through … and prepare yourself for similar bumps in the road.
What about upcoming news events and current market conditions?
You could be forgiven for taking one look at the rolling news and deciding that the planet is just in too much upheaval to even consider risking money on the markets!
When I first started trading, I can remember waiting for “things to settle down” … for “markets to get back to normal” …
And a couple of decades later, I’m still waiting!
There is no “normal”. Markets just keep churning on, from one crisis to the next; and they are relentlessly optimistic … until they aren’t, and suddenly spiral into a panic. Uptrends are littered with the warnings of pundits and “gurus” that we’re hitting the top of a bubble, so – inevitably – a handful of them will be right when the market turns, and will claim some superior insight.
I read a nice comment from Ben Carlson at Ritholtz this week …
If I was named Financial Market Czar one of the first rules I’d institute would be to give every pundit a punch card. You would only get 5 opportunities to call a top or bottom in the markets and every time you made a wrong prediction you’d get a punch. Once all your punches are used up, no more making extreme predictions again.”
The truth is that we don’t know what the markets will do in the coming weeks … nor do we know how our methods will perform in the coming weeks …
There is no “right time” or “wrong time” … just now.
And what we do know is that the sooner you start, the better your chances of long-term success, because only time will enable compound investing to build huge funds from tiny beginnings.