When Is The Best Time To Invest?

It’s not surprising that investors (especially first-time investors) often worry about the timing of their stock purchases. They believe they can accurately predict when it will rise and fall.

The financial media is obsessed with market timing. Market timing doesn’t work for the average investor – or even most professionals – so don’t listen to the media noise.

Related: Why investors should embrace simple solutions

Yet this is exactly what investors are doing when they sit tight on their money in cash accounts and money market funds, fretting and worrying and waiting for the right time to buy in.

Is now the best time to invest?

There is a common fear of investing at the top of the market – resulting in you staring at big losses right off the bat. Of course, there’s always the possibility of investing right before a market downturn. But no one knows for sure when this will occur.

An acquaintance remarked last year that the market was overheating and a correction was surely due shortly. This was when the S&P/TSX Composite Index was around 12,800. Today (as of this writing) it sits at 15,550. In the meantime he has stayed on the sidelines waiting.

Time is on your side

Over the long term, the compounding returns of a well-chosen investment will add up nicely, whatever the market happens to be doing when you buy.

Related: 5 common mistakes investors make

Benjamin Graham (who taught value investing to Warren Buffett) stated that within a time frame of about 20 years you are more likely to get a solid return in line with true company growth rates.

Rather than fretting about when you should make your move, think instead about how long you’re planning to keep the money in the market.

Stocks are a very attractive option for long-term goals and will generally provide the best return on investment.

Take it in stages

Dollar cost averaging is a well-known strategy for purchasing investments, especially when making regular contributions. What if you have a lump sum sitting in your cash account? You can still spread out your purchases if you want to.

Related: Why TD e-Series funds aren’t just for beginners

However, a 2012 Vanguard study on dollar cost averaging versus lump sum investing found that over 10-year rolling periods, investing cash in a lump sum was 67% more likely to outperform relative to dollar cost averaging (assuming an investment mix of 60% stocks and 40% bonds).

Final thoughts

Is it the best time to invest? Regardless of where the stock market sits, the answer is “Yes!” The key is to start now and contribute as much as you can.

Successful investing relies on analyzing individual companies (or funds), not monitoring the market every day. Look for value, quality, and future prospects.

Make sure you keep your time horizon and asset allocation in mind as well as your personal tolerance for risk.

As John Templeton says, “The best time to invest is when you have the money.”

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  1. Barry @ Moneywehave on September 9, 2014 at 9:39 pm

    Due to my pension I have limited room to invest into my RRSP so I only do it once a year. I don’t think much about market timing since I’m usually rebalancing with those funds.

    You’re bang about knowing your time frames, if it’s for retirement then market timing doesn’t matter, however if that’s money for a home purchase in the near future it’s best to not invest at all.

  2. Robert on September 10, 2014 at 7:11 am

    Over time I developed the philosophy that I should invest until it hurt a bit.

    People often buy a car or nice vacation or even a new smart phone or computer when it hurts their finances, and then decide that they cannot invest yet. I figure the best thing is to do it the other way around. Buy investments until you are feeling the pinch. Then decide if you really need the new iPhone or car to replace your currently functional one.

    Since not many investments fall to zero value (unless you are buying hot tips on penny stocks), not only are you investing in your future, but you have something to fall back on in a crunch – try that with your overpriced shiny iPad or car that just depreciated 25% in it’s first year!

    So, if you are not already hurting a bit from your investments, now is the time.

    • Boomer on September 11, 2014 at 5:25 pm

      @Robert: This is a great approach. Thanks for the advice.

  3. Kathy Waite Eureka Investor Guidance on September 10, 2014 at 10:15 am

    I like Robs approach , “extreme pay yourself first” !

    If investing long term better to be in than out of the market, if rebalancing annually you will sell high buy low any way.

    Kathy. Fee for service planner Saskatchewan

  4. Tawcan on September 10, 2014 at 12:11 pm

    Interesting point by Robert, I like his approach.

    It’s too difficult to time the market. Rather than trying to time the market, just go ahead and invest and continue investing moving forward.

  5. Kathy Waite Eureka Investor Guidance on September 10, 2014 at 1:17 pm

    The biggest hurdle I deal with is procrastination. Market timing can be an excuse to procrastinate. I consider my self a professional reminder to get things done and move closer to your goals.

    Agree Tawcan: get it done!

  6. Stephen @ HowToSaveMoney.ca on September 10, 2014 at 1:24 pm

    I’ve fallen victim to market timing before. Sometimes it has worked in my favour and sometimes it hasn’t. Now definitely seems like a perilous time to invest, but you can never really know if the bull will keep raging or the bear will come out. It looks like there is a bit of a sell off starting to happen right now actually but time will tell if it turns into anything.

    I’m just transferring my investments from my old work RRSP to my self directed account so I sold those high. I’m going to have to make a decision what to invest them in soon when they become available. Hopefully things will have dropped a bit by then, but I’ll probably just buy in when I can to avoid getting burned by market timing.

  7. Janine on September 10, 2014 at 2:55 pm

    If you’re in it for the long haul then I think regardless of what you are investing in some will be winners and some will be losers. If you don’t invest at all then you have neither, which is no good because you have no chance of being further ahead.

  8. Sandi on September 11, 2014 at 3:50 am

    And here’s some interesting research that answers the question we’re all scared of “What if I only invested in market peaks?”: http://awealthofcommonsense.com/worlds-worst-market-timer/

    • Boomer on September 11, 2014 at 5:23 pm


  9. Lucas on September 12, 2014 at 6:45 pm

    Dollar cost averaging should work. But if you are buying high, like right now, you need the market to fall in order to get a decent average. Otherwise you are buying high and praying the market goes higher.

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