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How to know when to invest

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One of the biggest questions that beginning investors often have is "When is the right time to invest?" If you are looking to enter into the investing world, you may be wondering if you should jump right in while the market is down, or wait for it to go up. This is a valid concern since making an initial stock purchase at a bad time can give you a big loss, at the start. However, it is important to understand that no matter when you decide to being investing, time is in your favor. Beginning investors often overlook the fact that investing has an intrinsic time value. This means that over time the interest and returns of your investments will build up, no matter what the market was doing at the point you first entered it. This means that no matter when you get started, if you understand that investing is a long term process, versus a get rich quick scheme, you can most likely be successful. However, if you are still concerned about knowing when to invest here is some information to get you started-

  • Don't worry about time-Many financial experts stress that you should think about the length of time, you are going to keep your money in the investment, rather then worry about when you should make your first investing purchase. This is crucial since each type of investment offers a different degree of both, risk and return. In addition, each investment is best, in a different time frame. This means that if you are looking for something that will pay off in a few years, versus planning for retirement, then you will have to choose a different investing vehicle.
  • Decide when you need the money-It cannot be stressed enough that successful investing takes time. Real investing is not speculating. The bottom line is the longer, the investor can keep their cash, in the investment, the higher the level of risk they can accept and the more time the investor will have to be waiting out period of a bad market. However, if you are going to need to be accessing your money in the next 3-5 years, you should choose an investment vehicle that is lower risk. This means that you should avoid investing in stocks and stock-centered mutual funds. In addition, if you will need your money, in less then 3 years, then you should avoid mutual funds that have bonds and any type of real estate investments. Keep in mind that you should have a defined time period, before choosing what you want to invest in.
  • Know when to get out-It could be even more important to know when to get out of the market, as it is to know when to get in. It is important to understand that this decision most often applies to stocks and stock mutual funds, since bonds will already have a time limit attached to them. You should not make the mistake of thinking that you can time the market. Investors who make the mistake of thinking that they can predict the market, often find themselves with substantial losses. Financial experts stress that the timing of the market is virtually impossible. The bottom line is that several studies have shown that those investors who move from investment to the next, in hopes of improving their investment performance, usually do worse then those investors who are content to stay with their investments. You will need to make sure that you have both that patience and the endurance needed, in order to ride out your investment. The only exception to this rule, may be if you feel like your money market fund is not being managed effectively enough, it may be time to move on to someone else.

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