“Timing is everything” - Winston Churchill (probably)

Is it though? When it comes to investing, I hear people ask all the time: “is now a good time to invest?” My answer is always the same:

There’s a few reasons why. Let’s break it down.

Time in the market vs. timing the market

Say that five times fast.

Time in the market means investing your money and keeping it invested for a long time. The whole idea here is to ride out the ups and downs of the market. Sure, you’ll see your investments shrink sometimes, but the best days in the stock market are usually very close to the worst days. Check this out:

Notice how a few of the best days come shortly after a few of the worst days? Missing just a few of those best days can seriously lower your total long-term returns:

Missing just 10 of the best days in the market would have cut your 20 year return in half relative to staying invested the whole time! Wild. 

So what does timing the market mean? It’s trying to time the stock market to buy at the bottom and sell at the top. Good luck! Even the pros don’t try to do this. Why? Markets are unpredictable!

Key point: the longer your money is invested the more time it has to grow.

Dollar cost averaging

Here’s another key reason why the time to invest is every day, every hour, this very minute, perhaps: dollar cost averaging. This might sound fancy (or average), but it's really simple. Dollar cost averaging means investing a fixed amount of money at regular intervals, no matter what the market is doing.

Let's say you decide to invest $100 every month. Sometimes you'll buy when prices are high, and other times when prices are low. Over time, this can balance out, and you might end up paying a fair average price for your investments.

Dollar cost averaging helps take the emotion out of investing. Instead of worrying about whether the market is up or down, you just keep investing regularly. This can be a smart strategy because it keeps you from trying to time the market.

As an emotional guy, I follow this strategy diligently.

The magic of…compound interest

Our namesake investing term - you know it’s an important one. 

Einstein called it the eighth wonder of the world for a reason. Here’s how it works: when you invest money, you earn interest or returns on that money. When you leave those returns in your investment, you start earning interest on your original money plus the returns. Over time, this "interest on interest" can add up in a big way. 

Why does this impact the time you invest? Because the longer your money stays invested, the more time it has to benefit from compound interest!

Sooooo now what?

Now is the time. The sooner you start investing consistently, the more time your money has to grow with compound interest. Staying invested makes sure you capture all the best days in the market, which make a big difference. And dollar cost averaging will make investing less stressful!

Whether you have a little or a lot to invest, the key is to start riiiiiiiiiight meow.