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 towards your Registered Retirement Savings Plan (RRSP) or by purchasing a few shares 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:
- Time in the market versus timing the market: 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.
- Long-term growth: 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.
When you invest regularly, you accomplish three important investment goals:
- Dollar cost averaging: Meaning you make your investment purchases 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.
- RRSP tax benefits: Your money grows tax-deferred inside your RRSP so regular contributions and the magic of compounding can add thousands to your retirement nest-egg.
- Ease of use: 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.
Date reviewed: January 27, 2015
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.