WHEN is a good time to invest???
Updated: Oct 30, 2020
The COVID-19 Pandemic has affected us all in some way at this point. If you are lucky enough to still be employed or find yourself in a situation where you are actually spending less money (reduced childcare costs, no sports to travel to, eating out less) you may be wondering if now is an opportune time to invest.
With the Dow Jones still down almost 5000 points or approximately 16% from its highs earlier this year many are wondering whether this is an investment opportunity or too early to tell.
The answer to the question: “Should I Invest?” ought not to have changed from pre-quarantine era. Why? Because it will depend on the same set of facts specific to your individual situation.
1. Do you have extra cash?
If you don’t have any extra savings lying around, then you probably shouldn’t worry about investing. If you are living paycheque-to-paycheque (or currently unemployed) establishing a budget and setting aside money in case of emergency should be your first priority. If/when you have saved enough you should then consider investing. As many people discovered with this recent pandemic (and the onslaught of lay-offs, reduced hours, etc.) emergency savings of at least 6 months of essential expenses (food, mortgage, utilities, etc.) are critical.
2. Will you need this money for anything else in the next few years?
Throwing money into an investment in the hopes of turning a super-quick profit isn’t investing – it’s gambling. If you need the money to pay taxes or cover immediate expenses you shouldn’t be investing it. That said, if you do not need this money in the immediate future and want to save for your long-term goals (ie retirement) investing could be right for you.
3. What else could you do with this money?
If you have high-cost debt (ie credit cards, lines of credit, student loan debt) it may make more sense to pay that down first. If the debt/loan is cheap however, such as a mortgage, paying that off early may make less sense than putting that money towards your long-term savings/investments.
In volatile markets many investors try to time the market by either jumping in at what they think the bottom is or waiting until it begins to recover. The problem is no one actually knows where the bottom will be, and the only way to tell for sure is to look back and review after the fact.
Your individual circumstances are really the only determinant of when it is a good time to invest, not the current conditions of the financial markets. It has been proven time and time again that it is not about timing the market but your time IN the market. How do you get IN the market? By speaking to a Financial Advisor and setting up regular contributions into an investment account.
So, if you have been thinking of investing, and you have the cash to do so, you know you aren’t going to need it for anything else in the next few years and you aren’t carrying any high-cost debt, then yes, now may be a good time to invest.
Brooklyn Scott is a Financial Advisor/Mutual Funds Representative for Lewis & Jones Group/Desjardins Financial Group/Desjardins Financial Security Investments Inc. in Killarney, Manitoba.
Mutual funds are distributed through Desjardins Financial Security Investments Inc. For insurance products, Desjardins Financial Security Investments Inc. acts as a national insurance brokerage agency.