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When to Invest:
Now is Usually the Best Time

Never Too Soon, or Late...
Just around half of people participate in retirement plans. Though there may be many reasons why many do not make use of retirement investment accounts, some of the reasons may be related to the question of when to get started. Usually, for the average investor who is trying to build a financial base for retirement, the best time is right now. Though retirement may seem distant for those who are in an earlier stage of their career, getting started as soon as starting a first job may be a very good financial decision. Though stock prices will always have ups and downs, holding stocks over the long-term allows time for your holdings to grow in value and weather through times of turbulence. While it is never too soon to get started, it is also never too late. A finance professional can help decide what level of market risk may be a good option for someone who is closer to retirement and may need to take on less risk.

Account Minimums
Some may wonder if they have enough money to start investing. Though there may be times when waiting or pausing investment contributions may be a good idea, such as when focusing on paying down debt, anyone can get started investing with any amount of money. Traditionally, professional money managers have had a minimum amount that must be invested in order to do business with the firm. Often, the minimum amount is $100,000 or more. With just around 30% of people having that much to invest, minimum amounts can pose a barrier to financial services. However, innovative investment management firms are using business models that welcome those who are starting a nest egg of any size.

Time In, Not Timing
Though stocks might be a good option for the average long-term retirement investor, wondering when a good time to get in the market may hold some back from getting started. Making predictions about the near or mid-term direction of stock prices is often called market-timing.
Timing markets is extremely difficult to do with sustained consistency. Even knowledgeable professionals get it wrong; and for longer-term retirement investors, shorter-term price movements are probably not that important. Getting a plan and sticking with it even through inevitable rough patches may be a better option than avoiding markets.

Process, Not an Event…
A long term investment plan usually includes an amount that will be contributed to retirement funds on a recurring schedule. Often, advisors recommend contributing 15% of your gross income to investment accounts. However, setting up retirement accounts with any amount is a great start. For those with a pension, they may want to contribute whatever remains of what is taken from their paycheck. For example, if 7% is deducted for pension contributions, the remaining 8% could be contributed to retirement accounts. Whatever amount is contributed, making the contributions on a steady, recurring basis can be a good way to reach financial goals. Making frequent investment allocations on a regular basis may help smooth possible price volatility while also reducing the chances of buying at a peak. Getting started with any amount can help to get the ball rolling, and to start the snowball effect of compound interest to work for you.

December 6, 2023

Markets Demystified is published the first and third Wednesdays of each month, and explores how stock market investing can relate to personal finance.

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