When is the right time to start investing?

Views & insights

Find out why the decision to invest depends more on your individual circumstances than on what’s happening in the economy


3 January 2023 | 3 minute read

Dipping your toe into the stock market for the first time can be a daunting prospect, especially in a time of heightened market volatility.

So, when is the right time to take the plunge? Funnily enough, the answer doesn’t depend on what is happening in the wider economy, but on your own individual circumstances and goals. Read on to find out why.

It’s almost impossible to time the market

In an ideal world, you’d invest your money just after markets had tumbled and just before they started to bounce back. Unfortunately, it’s pretty much impossible to determine when markets have reached rock bottom or when they’re about to recover.

A better tactic is to focus on your long-term goals and accept the fact your investments will have their ups and downs. After all, the longer you wait to invest, the less time you’ll have to see any returns at all.

As the old investment adage goes, it is time in the market, not timing the market that is key to returns. There have been some big stock market crashes throughout history, but patient investors who stuck to their long-term plans were rewarded time and again.

Have you built up cash reserves?

If you’ve built up cash reserves for emergencies and short-term goals, the right time to start investing could be today. It’s a good idea to have around six months’ worth of essential expenditure set aside in an easy-access savings account. This could help you pay for unexpected bills such as fixing things around your home.

You should also think about whether you have any expensive debts you want to pay off first. The interest rates on credit cards, overdrafts and personal loans are usually higher than the interest rates on cash and the average return on investments. By paying off expensive debts, you’ll likely be in a better overall position.

Consider starting small

If you’re feeling anxious about investing, you might want to consider starting small. This will give you a feel for the stock market and help to build your confidence. So, instead of investing a large lump sum, you could drip feed small amounts into the market each month.

Another advantage of setting up a regular investment is it removes the worry of investing a big lump sum right before a market decline. It can also help to smooth out stock market volatility. In some months, you’ll invest when markets are down and you’ll get more investments for your money; in other months, you’ll invest when markets are up and you’ll get fewer investments for your money.

This essentially averages out the price at which you buy investments, which can help to provide a bit of peace of mind.

Do your homework

Before you take the plunge, it’s a good idea to learn about the different types of investments that are available. This will help you feel more confident about committing your money. Investing doesn’t just mean buying shares in companies, but includes other asset classes such as bonds and property.

Spreading your money across different asset classes, sectors and regions can help to cushion the impact of one asset or sector falling in value. This is because they tend to perform differently to one another in a range of market conditions. How you split your money will depend on your individual circumstances, including your attitude to risk and how long you’re investing for.

Next steps

Investing can be a powerful way of growing your money over the long term, but getting started may feel intimidating. This is where getting some smart advice can help. An adviser will take the time to understand you and your ambitions, explain whether investing is right for you, and help you create a financial plan that puts you on the path to achieving your goals.

For smart advice that’s tailored to you, speak to one of our advisers today.

The value of investments, and any income from them, can fall and you may get back less than you invested. Neither simulated nor actual past performance are reliable indicators of future performance. Investment values may increase or decrease as a result of currency fluctuations. Information is provided only as an example and is not a recommendation to pursue a particular strategy.

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