The myth
There are potential benefits to investing even when conditions aren’t optimal. This is true even if it could take longer for you to see your money grow, since you could see better results at the end if you buy assets when their prices are low.
Of course, if you buy when the market is up, there’s less chance of volatility stressing you out by making asset values go up and down quickly.
That’s why some people believe that there is no “right time” to start investing, and that you should do it when you feel that you’re ready, regardless of how things are.
The reality
Throughout market cycles, asset values usually go up and down. Timing the market is difficult for even experts to do regularly, and so it can be difficult to identify when the situation is truly getting better.
However, if you wait for a time that you feel is right, you may miss out on worthy opportunities to grow your money.
Of course, there’ll always be a chance of picking the wrong investment and not seeing its value increase the way you expect or want, but not starting at all means that you’ll be sacrificing one of the biggest factors in an investment’s growth: time.
After all, time can do a lot for the overall performance of your portfolio. Given enough of it, even investments with modest growth still have a chance of reaching high goals. Time can also help balance out any volatility that your assets experience.
That’s the reason time in the market (the time you have investments) is commonly seen as more important than trying to time the market, especially since the latter is so hard to do.
The verdict: It depends (but mostly true).
If you do choose to start investing when the market is down, it may take a while before you see growth. However, given enough time, you may end up with better results than if you waited until the market picked up.
Since there are no guarantees in investing, you should take any opportunity you can find to increase your chances of success. Having more time can do that, although you should still exercise the proper precautions when investing (like using your risk profile as your guide and having an emergency fund before you begin).
Getting started can be the hardest part of investing for a beginner, especially when you’re still getting used to all the terms and concepts. Still, the sooner you make your first investment, the better the results might be when you need the money.
Mathematically speaking, you compute interest earnings by multiplying the principal by the rate and by the time (invested in the market). So, if you break it down, no matter how small the principal (your investable money) is, and no matter how low the rate (of return) is, for as long as you have been investing for a good amount of time, it will be able to give you considerable gains.
As the popular adage goes: “Time in the market beats timing the market.”
