We are a few weeks in the new year. Have you started investing yet? Is it the right time to start now or should you wait for a stock crash?
There are two views that you can align yourself with. The first one is that you should always look at the current price of the total stock market. When the stocks are at a high price you should wait it out and but them when the stocks have crashed. The benefit of this approach is that you are unlikely to buy the shares at a higher price. However you lose the possible gains.
The second possibility you have is by purchasing a few stocks (max 10% of your capital) at a higher price. It’s better to be present in the stock market with a low amount so you can start to feel the ups and downs on the market. You never want your first market crash to happen when you are in the market for more than 50% of your capital. An alternative method that you can slip under number two or add a new one is by doing dollar-cost averaging. Have an automated investing in place where you spend a certain amount a month to invest.
I’m pretty conservative. I believe that buying good quality is a good investment. I buy fewer things but of better quality. – Robin S. Sharma
In the end you should decide if you want to invest in something by taking everything into consideration. Don’t only focus on the price of the market. Take a look at your personal goals, do you want to just make a quick profit? For quick profits apply different rules, and it’s not what I’m going for or can give tips about. This is a risky business and at that it might be a bad idea to buy at a high price. But if you are staying in the market for the long term missing out on 2 years of being in the market with a small sum can be hurting you in the long run. Seeing your one month salary decrease by 40% will almost force you to get out. However stay in the market and see what the crash does to you. If it eats you up, keeps you up at night, let the money sit but don’t continue on investing. It’s not worth it if you can’t stomach a crash.
Another good consideration is what stock are you buying, what are you getting for it? If you bought facebook stocks 5 years ago you would have doubled your input. Buying the biggest offshore drilling contractor Transocean would have brought you the same amount the other way. Are you buying a share looking to sell it in 5 years or do you have a outline of 15+ years to resell the share? The longer you have to hold shares the more possibilities you have to sell it with a profit. Never keep a share upto 2 years before you want to sell it. If you want to risk a share plummeting and still be fine with it, then you are fine keeping it.
Look for the reasons you want to get started with investing and decide for yourself if you want to start now. The best advise that can be given is start small and see what happens. Only begin with money that you are willing to loose.