When to invest?

[argo]

Hi,

A friend of mine, accounting graduate, told me that the best time to invest is not now because the market in its highs, but in the end of May.

I have some money now and more coming at Christmas.

What would you recommend?

[safari]

Nobody knows whether the bull market will continue or not. You're investing for the long haul anyway, so trying to time the market is never a good idea. The best strategy is dollar cost averaging, in other words, investing a set amount regularly, so when the market is experiencing a downturn, you'll get the benefit of low stock prices.

[disneysteve]

Your friend is wrong, plain and simple. What he/she is attempting to do is called market timing, guessing when prices will peak and bottom out and investing at the bottom and selling at the top. The only problem is it isn't possible because nobody knows when a particular stock will start rising or falling.

I agree with safari. The way to go is dollar-cost-averaging. Set up an automatic investment plan and put a set amount of money into the account each month (or each quarter). When prices are low, your money will get you more shares. When prices are high, it will get you fewer shares. Over time, your average cost basis per share will likely be lower than if you had invested in one lump sum.

[scfr]

I agree completely about not trying to time the market.

Dollar-cost averaging is a good idea.

But if you'd rather invest all of your money at one time, if you are planning on investing in a mutual fund you may want to look at when they distribute their capital gains, so you don't end up getting taxed. For example, on the money coming in at Christmas, you may want to wait until after the first of the year to invest it.

[Ima saver]

That is how I started in mutual funds, I just put in so much a month. I think you should wait until the beginning of the year also.

[disneysteve]

Originally Posted by scfr

But if you'd rather invest all of your money at one time, if you are planning on investing in a mutual fund you may want to look at when they distribute their capital gains, so you don't end up getting taxed.

Absolutely. Year-end distributions can be substantial and really hit you with a big tax liability if you buy at the wrong time. Don't invest without checking the distribution date.

[yellow heel]

This is good to know. I was about to purchase more funds this year. Maybe I should wait til next year.

Where can you find the distribution date?

[sweeps]

Originally Posted by yellow heel

This is good to know. I was about to purchase more funds this year. Maybe I should wait til next year.

Where can you find the distribution date?

If you call the mutual fund company, they should be able to tell you.

[LuxLiving]

I'm not advocating market timing. I'm generally a dollar-cost averager. But, I thought this was interesting in lieu of recent discussions here.





<CENTER>Okay, I was clicking around...click, click, click when I ran in to this website which has a great article on The January Effect. Thought you guys might be interested since this in / out timing of the market was just recently being discussed here. Neat historical chart.</CENTER>


http://www.moneychimp.com/

Once there click under Volatility and Voodoo to find the article.

[PRICEPLUS]

Dollar cost averaging and what Sweepsplayer said!

[creditcardfree]

Originally Posted by scfr

I agree completely about not trying to time the market.

Dollar-cost averaging is a good idea.

But if you'd rather invest all of your money at one time, if you are planning on investing in a mutual fund you may want to look at when they distribute their capital gains, so you don't end up getting taxed. For example, on the money coming in at Christmas, you may want to wait until after the first of the year to invest it.

These tax implications do not apply to investors holding a fund in a tax-favored account such as an IRA or an employer-sponsored retirement plan.

Generally, the distribution amount reduces the share price by the same amount. Most people then have their distribution reinvested therefore buying you more shares at the lower price.

I agree on the dollar cost averaging, but if you have the money now...don't let the distribution of capital gains deter you if this is a ira or other retirement account.

[Broken Arrow]

When to invest?

ASAP!

[argo]

Originally Posted by Broken Arrow

ASAP!

Is winter better for investment than summer?

For example, Markio26 says:

"nov.01, i like to be in stocks with pe's of 8 or less, high dividend paying stocks, and stock plays of fallen leaders, like gtw, lu, f, gm, etc.. i stay in this position, until april 30, then sell off and go into bonds that pay high dividends....
the 401k is in a balanced stock/bond fund, a bond fund, and a small cap fund with dividends.. the rest of my money is in cash, cd's and high interest paying savings accounts... hth..."

[LuxLiving]

Argo you might want to follow the links here:

http://luxliving.savingadvice.com/20...-voodoo_16319/

[disneysteve]

Originally Posted by argo

Is winter better for investment than summer?

For example, Markio26 says:

The best plan is to be in the market all the time. Any attempts to time the market are ill-advised. It doesn't matter what month, the phase of the moon, an upcoming election, etc. You should invest regularly and stay invested for the long haul.

[sweeps]

Originally Posted by disneysteve

The best plan is to be in the market all the time. Any attempts to time the market are ill-advised. It doesn't matter what month, the phase of the moon, an upcoming election, etc. You should invest regularly and stay invested for the long haul.

Agreed! Even if a trend develops, investors catch on pretty quickly and take advantage of the trend, effectively eliminating it.

[vishenda]

Good day sweety

The best time to invest has to do with interest rates. If you think they are going to go up, don't invest. If you think you think they are going to go down, then invest your money.

They say not to invest your money in mutual funds in December because you are being charged for other peoples fees that were in the fund for the whole year. Better to wait until the new year. But I find that there is alway a mini rally in Nov-Dec. People feel good around Christmas and stocks usually go up. Likewise, sometimes when the weather is dark and gloomy for long periods, people get down and stocks go down. Sometimes stocks go down in the summer when people go on vacation. That didn't happen this year, there was a rally. So, you never know. To me, its all about interest rates.

The friend is partly true that the spring time is the most favorable time to invest, not in May but before April 15th is "ideal" to invest in the stock market.

You don't have to invest in the stock, go with a bond or a CD until you want to invest in the market or let it cool off. But there are plenty of ways to invest in the market even when its at its highest. So check it out. Its much better invested than in a checking account somewhere.

Hope this helps

[safari]

Originally Posted by vishenda

The best time to invest has to do with interest rates. If you think they are going to go up, don't invest. If you think you think they are going to go down, then invest your money.

I don't understand why people shouldn't invest when the interest rates are going up. Can you elaborate on this? The last few years the interest rates have been rising, while the stock market has been doing very well.

[disneysteve]

Originally Posted by safari

I don't understand why people shouldn't invest when the interest rates are going up. Can you elaborate on this? The last few years the interest rates have been rising, while the stock market has been doing very well.

It is just another example of why market timing is flawed. I've made plenty of money in the market over the past few years. Had I been sitting on the sidelines because rates were climbing, I would have missed out on thousands of dollars in gains.

argo, my advice is to ignore the market timers. Ignore the people who claim to know what the market is going to do and when it is going to do it. Jumping in and out of stocks based on season, interest rates, elections, etc. will ultimately cost you money in the form of transaction costs, taxes and lost potential gains.

I know there are those here who disagree, and I'm fine with that. I don't think you can go to any discussion on stocks without encountering some people who are convinced they've figured out a way to beat the system. I say forget trying to beat the system and just start investing over time with a long-term outlook.

[Hypersion]

Originally Posted by vishenda

Good day sweety

The best time to invest has to do with interest rates. If you think they are going to go up, don't invest. If you think you think they are going to go down, then invest your money.

How do you know interest rate will go up or down? Answer is you don't unless you have a magic eight ball.

Originally Posted by vishenda

They say not to invest your money in mutual funds in December because you are being charged for other peoples fees that were in the fund for the whole year.

Fees are charged daily for mutual funds.