Stocks have been on a roller coaster over the last few months. The stock market went from all-time highs to all-time lows in just a matter of weeks.
Investors are asking if they should take out their money. And those who haven’t even started investing, they are probably wondering if now is a good time to invest. It’s always a good time to invest.
In fact, you probably should have invested yesterday. Because every day you invest your money, you’re more likely to earn money on your investments.
The stock market has historically gone up which means that even if your portfolio has a bad year and you lose money, you’re likely to gain it back in a few years.
Every time you earn money on your investment, it contributes towards the amount of money that you earn interest on and so on. Think of it this way.
If you invest $100 and you get a 10% return, you have $110. If you leave that money in the stock market, you not only gained $10, but you will also get a 10% return on that $110, giving you $120, and so on.
Of course There is always a risk that you will lose some money, but if you keep your money in for the long-term, you’re more likely to get a good return on your initial investments.
No one knows how the stock markets will perform tomorrow or the next day.
The best you can do is try to understand how stocks work and have an understanding of why they might go up or down. But if you try to wait until the perfect time to invest, you’ll drive yourself crazy.
Instead of timing the market, you should try to diversify your portfolio in order to get a dollar-cost average when it’s time to retire.
There are a number of investing strategies and dollar cost averaging is one of them. The goal is to reduce the overall volatility of the market on your portfolio.
Keep in mind that this strategy assumes that prices will eventually always rise. And while historically that is accurate, the strategy can’t protect you from the risk of an extended declining market.