Investments articles:

When is a good time to invest?

Any investment should be looked at as a medium to longer-term project (five years or more). The sooner you start investing, the sooner your money could be working for you.

Investing can seem complicated. There are so many options and there’s so much jargon. We’ll explain a few investment truths, in terms that should make sense to everyone.

Some people try to ‘time the market’ – they watch how share prices are moving to find the perfect time to invest. They’re looking for prices to have fallen and hope to invest before they start to rise again. It’s very, very difficult to do. And all the time you’re waiting, you aren’t benefiting from potential growth. Any investment decision should be based on the medium to long term – which we take to mean at least five years.

We believe that good investment is about “time in the market”, rather than “timing the market”.

By trying to time the market you can miss possible opportunities. A good example of this is the recent performance of the S&P 500 index. The S&P 500 is an index based on the price of 500 large US companies. Its share price movements provide a quick look at the stock market and the wider economy.

It has consistently hit record highs over the past seven years. People who were waiting and trying to time the market may have been thinking that what goes up must come down, and the rally would have to end sometime. Each time they delayed investing, they’re potentially missing out on their money working for them.

The unpredictability of the markets means that picking the perfect time to invest can be very difficult, if not impossible. “A journey of a thousand miles starts with a single step.” Lao Tzu

When it comes to the potential for investment growth, timing is less of an issue than not being invested at all. You need to decide whether this is the right time to invest for you. You should base your decision on whether you have spare money that you can invest over the medium to long term. You also need to be aware of the risks that come with investing – markets can go down as well as up and you may get back less than you invested.

Investing shouldn’t just be seen as a short cut to the potential for higher returns. You should make all your decisions based on your own financial planning needs. If you can’t afford to lose money, or you’re fearful of the market, then investing may not be right for you.

If you do decide to invest, focus on the longer term. Invest when the time is right for you and give your investments time to mature. This could give you the best chance of making investment work for you.

If you've already invested online through Royal Bank Invest, you can track the progress of your investment as and when you want with your online investment account.