Jan 03

When is the right time to invest in the Stock Market?

A number of key events in 2017, such as the General Election and the anticipation over how the UK will exit Europe, have led to uncertainties in the stock market. The question that many are asking is whether they should invest in the stock market now or later?


Long-term thinking

The first two things to know are that a) investing should always be a long-term strategy; and b) the economy and markets tend to increase over time. For investors, this should ultimately mean a return on investment (or ROI) for those who have the capital to tolerate the inevitable ups and downs – a positive risk-reward approach.

A key aspect of investing philosophy, which should always be taken into account, is to allow time to do the heavy lifting and base any investment decisions on fundamentals, as opposed to second-guessing rises and falls or attempting to time the markets.


There are alternatives

Of course, when it comes to investing, there is no shortage of alternatives available to conventional stock market investing. Trading gold has proven popular of late – for instance at the end of December it hit a 3-week high on a weaker US dollar. Thanks to online trading platforms, budding investors can get expert analysis, free alerts and tips on how to plan gold trading, making it an intriguing option.

Currency trading has become a go-to alternative to traditional investing, with the likes of Forex proving popular among those who prefer a more fast-paced approach. Trading cryptocurrencies like Bitcoin has become especially popular in recent years. It’s worth noting, however, that a recent Merrill Lynch survey found Bitcoin to be the most crowded investment in the world.

For those who prefer the more traditional approach, there are a few other things to know, with regards to the right time to invest.


Valuations and prices

Headlines relating to record highs for stock markets, such as the FTSE 100 or S&P 500, are not uncommon. While index values are indicative of a stock market’s health, it should be noted that these numbers are solely based on share prices.

It isn’t only price we should focus on- we also need to take into account a company’s underlying value. Valuations are also very important, as they give a clear sense of the market’s conditions.

Investing calls for patience and assuming a long-term view. When we make investment-based decisions, the wise approach to take is to ignore any noise being made in the market and focus on changes in value and investing fundamentals. These are the key aspects of long-term returns and can be forecast with some accuracy.


Short-term solutions are never the answer

At the same time, short-term returns are driven by investor sentiment and changes in valuation. It’s impossible to predict these consistently, and attempting to time the markets can potentially mean missing out on gains and locking in losses.

This is the reason that short-term trades and timing the markets is never a good idea. While marginal tactical calls are sometimes advisable, should risks or opportunities present themselves, longer-term strategic asset models are always the wiser, overall approach.


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