3 Reasons Now is the best time to start investing

by Ana Lopez

Opinions expressed by businessupdates.org contributors are their own.

Thanks to record high inflation, geopolitical instability and the first rate hikes in years, the current market is, simply put, incredibly volatile. Existing investors are making strategic changes to their portfolios and new investors are unsure if they want to get in at all. But for those lucky enough to have available resources, is now the right time to start?

Here are three reasons to slowly wade in.

1. Time in the market is better than timing the market

Generally, when one starts investing is not as impactful as how long one invests. With a long enough time horizon, a well-diversified portfolio, and the strength of compounding, portfolio volatility tends to smooth out. This has been proven repeatedly historically when it comes to the stock market.

In contrast, “timing the market” or waiting for stocks to hit new lows or drop from recent highs so an investor can get a bargain is risky. Short-term market behavior is often unpredictable, with current trends changing in the blink of an eye. Waiting for the “perfect” time to invest can mean skipping potential gains.

In other words, for many waiting traders, now is a good time to invest as the markets are down. But exceptions may arise for those who need their money quickly, as a short-term decline can wipe out a portfolio overnight. If you are a new investor looking for a long-term buy and hold strategy, now is one of the best times to enter the markets and start investing.

Related: create more wealth by playing the stock market

2. Downturns leave more room for growth

Many investors see short-term volatility as a risk that negatively impacts their portfolio. In the short term, this is true: volatility often depresses the overall value of one’s investments.

That said, one of the main ways the stock market generates returns is when investors buy low and sell high. And what better way to take advantage of big price differentials than to buy in when the market swings downwards? Don’t forget to time the market – a good long-term growth strategy is to buy when the market is low.

It may help to view market volatility as a form of bargain hunting. Buying high-quality investments when they go “on sale” allows investors to increase their future profit margins when the market recovers. The trick is to separate the junk from the gems.

Related: How to Start Investing

3. The market will perform sooner or later

There is no guarantee that an individual security will make a profit. But historically, given enough time and increased economic activity, the stock market always outperforms eventually.

That said, the time between a crash and recovery varies widely, and there’s certainly no telling when that will happen. As such, it is almost impossible to determine how long investors should wait to realize profits.

For example, most stocks took 12 years to recover from the Great Depression. But during the COVID-19 pandemic, many stocks recovered in just four months. This is a sobering reminder that there is no way to time bull or bear market cycles and that a market recovery can occur even in some of the worst economic conditions.

Related: Why You Should Invest in Mutual Funds vs. Individual Stocks

Slowly start learning good habits and ‘feel’ the market

So, is now the right time to invest? For investors who are not yet on the verge of retirement, the answer may be yes. Every investor should consider their risk tolerance and time horizon before deciding where and when to invest. Starting slowly can ease new investors into the market without introducing excessive risk.

Beginners can also simply start with a dollar-cost averaging method, investing small amounts at regular intervals to offset the ups and downs of the market. While not as exciting as day trading, dollar-cost averaging reduces the temptation to time the market and can even lead to greater profits for investors.

As terrifying as today’s market may seem, competent investing is less about day-to-day developments and more about the future. Be strategic, stay focused and only risk what you can afford not to touch in the future.

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