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The Best Time to Invest Thumbnail

The Best Time to Invest

Investing Insights Markets Economy

By Michael Foster, CFA, CFP® 

It’s only human to want the best possible investment performance. Why settle for less if you can potentially earn more on your money? A huge concern I often hear about in the news, from family and friends, and especially from unsolicited emails from different fund companies revolves around timing the market. This seems especially common in years with big swings in market returns, either positive or negative, like we experienced in 2021 and 2022. In times like this, when should we invest?  

Investing After Declines  

Investing after the market has dropped can be scary. What if things continue to get worse or there’s a prolonged economic downturn? The chart below shows how the S&P 500 has performed over a 1-, 3-, and 5-year period following a market decline of 10% or more. Returns are, on average, positive after these periods. Investors have historically been rewarded for buying after markets have declined. 

Source: Dimensional Fund Advisors 

Investing After New Highs 

So, if investing after declines leads to positive results on average, should we expect similar results when investing after the market hits a new high? Are prices inflated? Are we buying high only to have to sell low later? The chart below shows the same as the prior except after the S&P 500 hits a new high. On average, investors have been rewarded after 1-, 3-, and 5-year periods after buying at what was then the top period in history. Amazing! 



Source: Dimensional Fund Advisors 

In my opinion, the best time to invest is when you have the money to do so. There will continue to be more market declines and new highs over time. I try to tune out the noise and focus on time in the market versus timing the market. 

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. The market and economic data are historical and are no guarantee of future results. All indices are unmanaged and may not be invested into directly. The information in this report has been prepared from data believed to be reliable, but no representation is being made as to its accuracy and completeness. Nothing in this material should be construed as investment advice offered by Dolan Capital Advisors, Inc. This market commentary is for informational purposes only and is not meant to constitute a recommendation of any particular investment, security, portfolio of securities, transaction, or investment strategy. No chart, graph, or other figure provided should be used to determine which securities to buy, sell or hold. No representation is made concerning the appropriateness of any particular investment, security, portfolio of securities, transaction, or investment strategy. You should speak with your own financial professional before making any investment decisions. Past performance is not indicative of future results. Dolan Capital Advisors, Inc. does not guarantee any specific outcome or profit. These disclosures cannot and do not list every conceivable factor that may affect the results of any investment or investment strategy. Risks will arise, and an investor must be willing and able to accept those risks, including the loss of principal. Certain statements contained herein are statements of future expectations and other forward-looking statements that are based on opinions and assumptions that involve known and unknown risks and uncertainties that would cause actual results, performance, or events to differ materially from those expressed or implied in such statements. Ben Dolan and Michael Foster are investment advisor representatives of Dolan Capital Advisors a North Carolina state-registered investment adviser. Investment advice offered through Dolan Capital Advisors, Inc.

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