Right time to Invest?

Hi,

It is essential that you know when the right time to be a buy and hold investor.

Why?

Because if you get the timing right you’ll be using investments as they ought to be used.  The vast majority of people do OK from Investments over their lifetime, but for me that’s not good enough, for me If I’m putting my hard-earned money to risk in a market I want to make sure I invest it as efficiently as possible.

If you had Invested in 2000 until now, you’ve only just broken even and should have a small profit – 13 years to break-even!  = Nightmare.

It is true that you’d of earnt Dividends during those 13 years which might of grown your account/Investment by around 5% per annum so it was not all lost.

But the major point of taking the risk of Investing your money in the markets is to grow it at a rate greater than what is available via a bank etc.

So taking our 2000-2013 example above, we’d of grown the account by approx 65% ish purely from dividends in 13 years = 5% average growth per year – good but not exceptional (as you’ll see).

Now during this period of time the markets have taken a huge beating and although you’d of got your dividends, you’d of also taken huge capital losses to the account too!  I’m assuming you’d of just sat tight and remained fully invested – hence the 5% per annum dividend returns.  If at some point you’d of pulled the plug and quit the market, you’d of no doubt suffered big losses.

I’ve posted on this subject before, as you can see 2000-2013 was not a perfect period for Buying and Holding, yes we got our dividend income/payments to offset but not great, so from a capital growth perspective this period has been terrible.

It is during periods like 2000-2013 that I do not advocate being a Buy and Hold Investor.

Now if we contrast 2000-2013 to 1982-2000, then this WAS a period to be a buy and hold Investor.

Here’s the stats for the S&P500.  Approx starting value = 120, Ending value of = 1550 approx

Growth in 18 years = 1291% / 18 = 71.7% annual capital growth + dividends?  Approx 3% per annum = 54%

= approx 75% per annum growth on Invested funds

Clearly this WAS a time to be a buy and hold investor.  just by being a buy and hold investor during that time you’d of beaten most of the professional fund managers – by doing virtually NOTHING!

If all you ever knew were WHEN the key times to be fully loaded up as a buy and hold investor and when not to be you’d be a star Investor, massively outperforming most professional money managers!

The Investors of 1999 thought they were genius, they weren’t the genius was the one who invested in 1982 and bailed in 2000.

Also the Investors of 2007, the bull markets back!

Know what market you are in and how to invest for that market, that’s how you’ll win at the long-game, during the down times that’s when it pays to become a trader or understand the internal structure that the down periods form to profit from.

This is hugely difficult for the average investor as there are many conflicting notions about the markets.

The challenge becomes to beat the market, not be beaten by it

Good Luck.

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1 Comment

  1. Regardless of what everyone tells you – Timing and when you come to the market are very critical and vital aspects of Investing, as well as how long you hold onto a position for.

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