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Is Now a Good Time to Invest?

Is Now a Good Time to Invest?

June 11, 2024

I'm always meeting with people.  Recently, this has come up.  It's probably a bad time to invest because the market is high.  How do you answer this?

When Is the Right Time to Invest?


People have different reasons and timing to invest their money.  Maybe they changed jobs and want to do something with an old retirement plan.  Maybe they are getting ready to retire and are thinking about creating a retirement income plan that will last for the rest of their lives.  Maybe they received an inheritance and don’t know what to do.

Basically, there are a couple of choices.  Keep the money in cash or invest it.  I guess you could also spend or give it away, but I’m focusing on situations where people have goals, want to invest and need some help.

Right now, you can invest your lump sum into a conservative account like a high yield savings account or a CD and get 5% or so interest rate.  You won’t have any risk to your principal and 5% doesn’t seem that bad.  You could just wait until the market goes down, then invest the money for the long term. That makes sense, right?

I saw a post from a guy named Nick Magguilli on LinkedIn.  He said, if you think it’s hard to invest your money when stocks are expensive, just think how hard it will be when they finally look cheap.  They look cheap when the market has fallen or crashed or whatever other term you want to insert here.  The TV is screaming that the economy is a disaster, it’s an unprecedented situation and you’re wondering if everything will go to zero.  Do you really think you have the guts to pull the trigger then?

Every Time the Market Hits an All Time High, It Hits and All Time High


How many times have you heard that statement?  The Dow Jones Industrial Average reached an all-time high today.  The S&P reached a record high.  In February of 1998 the S&P 500 reached 1000 points.  In October of 2007 it reached an all-time high of 1565.  It did not hit that level again until April of 2013.  August, 2013: 2000 points.  July, 2019: 3000 points.  April, 2021:  4000 points. 6/6/2024, the S&P 500 closed 5352 points.  Just for some history.  The Monday after I was born, 8/5/1963, the S&P 500 closed at 74 points.

What would have happened if you had money to invest in 2008 or the beginning of 2009?  From October of 2007 to March of 2009 the S&P 500 had dropped from 1565 to 676.  That was the perfect time to buy, but people were terrified.  Our entire economy was in a free fall.  Plus, that was the worst crisis we had been through since the Great Depression.

What’s the Point?


People often ask me, what’s the market going to do?  I usually say it’s going to go up.  Over time, I’m always right.  That being said, nobody knows what it’s going to do over the short term.  So, what is a person supposed to do?

If you have money to invest, you need to decide what is it for and when do you need it.  If you have short term needs like, I’m going to buy a new car next month or we’re sending our kid to the university in August, you need to keep that money, liquid and secure.  It doesn’t make sense to take on the extra risk.

If you have longer term needs like, I need this money for retirement in 20 years or I want to pay for college for my new born baby, then it makes more sense to invest that money for the long term versus leaving it in a conservative account.  Over longer periods of time, cash has averaged around 3% per year.  Currently, you can get over 5% on a high yield savings account.  While this may sound great, since 1950, stocks have averaged 11.4% and bonds have averaged 5.4%.

The point of this is, you should use short term, secure investments for your short-term needs and if you have longer term needs then it makes more sense to invest for the longer term.  The other thing to consider is, this is a blog about a general situation.  Everybody’s situation is unique.  It’s called personal financial planning because it’s personal.

With that being said, if you have money to invest for the long term, it generally makes sense to invest it.  If you have short term needs, keep that money safe, secure and liquid.  The extra interest you might get in the short term usually isn’t worth the risk.  But in the long term, the additional return is worth the extra volatility. 

If you want to talk about your personal financial planning needs, feel free to reach out to me HERE.  I’m always happy to set up a complimentary call to see if I can help you.  As always, thanks for reading.  KB