When is the right time to invest?
You’ve managed to put aside a little extra cash or you’re expecting a nice tax refund and
wondering what to do with the money. You’re thinking about investing it – maybe in your
Registered Retirement Savings Plan or by purchasing a few shares of this or that to add to your
non-registered portfolio. But you’re hesitating – markets are volatile right now. Is it better to
wait? When is the best time to invest?
The answer is: Make your investment as soon as possible. Here’s why:
• Most seasoned investment professionals will tell you that it is almost impossible to time
the market. They will also tell you that time in the market is much more valuable than
attempting to time the market.
• Markets move up and down but the historic trend is up – so staying true to a long-term
investment strategy delivers far higher returns than jumping in and out of the market.
• The best long-term strategy for most investors is to make your investments immediately
– even if the market is at its lowest point of the year – and, even better, try to invest
regularly instead of holding off and making a lump sum investment once a year.
• When you invest regularly, you accomplish three important investment goals:
- You take full advantage of ‘dollar cost averaging’ – meaning you make your
investment purchases (either in non-registered stocks or by acquiring more units
in your RRSP) whether the price is lower or higher and, over time, this results in
a reduction in the average cost of your investments while improving the potential
for longer-term returns.
- You maximize the benefits of your RRSP. Your money grows tax-deferred inside
your RRSP so regular contributions and the ‘magic of compounding’ can add
thousands to your retirement nest-egg. For example, if you contribute $200
dollars a month to your RRSP (at an average compounding annual return of 8%)
after 25 years you will have $190,205. But if you make a single lump sum
contribution each year, you will have only $175,454 in 25 years.
- It’s much easier to come up with $100-200 each month (say through a Pre-
Authorized Contribution – PAC – plan) than finding a lump sum to invest once a
year.
A regular and balanced investment strategy will ensure you achieve your financial goals. Your
professional advisor can help you set up an investment plan that fits your budget and dreams.
This column, written and published by Investors Group Financial Services Inc. (in Québec – a Financial
Services Firm), presents general information only and is not a solicitation to buy or sell any
investments. Contact a financial advisor for specific advice about your circumstances. For more
information on this topic please contact your Investors Group Consultant.
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