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]

Re: When to invest?

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]

Re: When to invest?

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]

Re: When to invest?

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]

Re: When to invest?

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]

Re: When to invest?

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]

Re: When to invest?

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]

Re: When to invest?

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]

Re: When to invest?

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]

Re: When to invest?

Dollar cost averaging and what Sweepsplayer said!

[creditcardfree]

Re: When to invest?

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]

Re: When to invest?

When to invest?

ASAP!

[argo]

Re: When to invest?

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]

Re: When to invest?

Argo you might want to follow the links here:

http://luxliving.savingadvice.com/2006/10/27/the-january-effect-volatility-voodoo_16319/

[disneysteve]

Re: When to invest?

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.