When it comes to the stock market timing is everything and nothing all at once. No one can predict what the stock market is about to do, whether it will be up or down. If you get started or pull out of the stock market at the wrong time, you can suffer a huge loss.
Many investors, especially if they are new to the stock market, worry about their timing. While you can’t predict exactly what the stock is going to do, you can time your investments and try to make the most out of the stock market ups and downs. However, when is it a good time to invest? Is there a perfect time to invest?
According to Money Mini Blog, stocks have cheapened and the sentiment surrounding the stock market has improved. 2016 may be the year to invest. If you are looking into investing your money, you may be concerned about whether or not your timing is right. While 2016 should be a good year for the stock market, there is still a significant amount of anxiety surrounding time and investing. When should you buy? When should you sell? When will you need the money? Don’t fret – time is the concern of many investors. Here are a few things to take into consideration:
Time is on your side
When you first invest your money, time is always on your side. When investing your money long-term, the compounded returns will add up (depending on what the stock market is doing when you buy your shares). The most important part of timing when investing is don’t be wasteful, of your time that is.
Instead of worrying about your first stock purchase, think about how long you are planning to keep your money in the stock market. Each investment you make will have a different degree of risk and return. Because each will have a different level of risk and return, the best-suited time frame for investing will differ between stock purchases.
Will you need the money?
Before you place your money in the stock market, you need to think about how long you will be able to keep the money in the market. As previously stated, different investments need a different amount of time to show a nice return. If you need the money quickly or will need it before the investment will show a return, you may need to rethink your investment decisions.
If you can wait a longer period of time, you will likely see a better return. When you can keep your money in the market for longer, you can afford to invest in stock with higher risk. If you need your money within a few years, you should probably put your money into an individual bond or a certificate of deposit (CD).
When should you sell?
Some investors pride themselves on being able to time the stock market, but there is no surefire way to predict whether the stock market is about to rise or fall. However, if this was the case, there would be a lot more millionaire (and billionaire) investors than there are now. According to Motley Fool, there are a couple factors that may scream “sell now:”
- The business changed. If the fundamentals of the business change, the stock is likely to drop soon. If people are no longer able to understand or use the business in the way that they always have, the stock is likely to change. It is also likely to drop if the company’s basic products are being replaced by something newer and better elsewhere.
- The stock is becoming rocky. If you investment in a company seems to be becoming rocky, sell. This means that if the slightest bad news sends the stock prices tumbling, you should sell. If the risk of the investment outweighs the tax hit you’d take by cashing out, you should sell.
Keeping those two points in mind, many of the other stock markets scares can be ignored. Be sure to review your investments, keep an eye on what you’ve placed your money in and let it be. Remember, time is on your side and you can always decide when you want to remove your cash from the market.
Photo: Flickr: David Lofink
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