Is now a good time to start investing?

[merlin7676]

I understand staying the course if you've already been investing for awhile but what about if you are poised to start investing?  I am getting ready to invest/open a VTSMX but with the market at an all time high should I wait?   I don't want to time the market but it seems like this flies in the face of buy low/sell high.  Sure the market can go up even more but it can also drop; I don't have a crystal ball to say.

[Tyson]

Question - if we expect a return on our investments, that means the market goes up over time.  Which means it'll consistently be at or near it's all time high most of the time. 

Put your money in now.  Here's some math to help you feel better:

http://awealthofcommonsense.com/2014/02/worlds-worst-market-timer/

[Frankies Girl]

It doesn't matter what the market is doing right this minute. It may very well be at an all time high and crash tomorrow. Unless you're investing for a very short timeline - then the best time to invest is right now.

If you're investing for your future and it is 10+ years away before you need the money, then you'll be fine. Crashes happen so definitely get used to the idea and adjust your asset allocation accordingly to ride out the bumps, but long term the market always goes up.


Recommend reading Jim Collins' book or check out his stock series. Here's a pertinent chapter:
http://jlcollinsnh.com/2012/04/19/stocks-part-ii-the-market-always-goes-up/

And someone just starting out too:
http://jlcollinsnh.com/2013/05/22/stocks-part-xviii-investing-in-a-raging-bull/

[merlin7676]

Okay that's what I thought but I wanted to make sure before I went ahead and did it..thanks for the confirmation :)

[NP]

The market (I suppose by 'market' you mean the U.S. stock market) is often at an all time high, that's normal. I wouldn't be very concerned about it if you're planning to invest for the long term (10+ years).

I do believe that U.S. stocks are a little expensive right now, so I have slightly increased my allocation to foreign developed and emerging equities, both of which seem to trade at a better price. (Check the CAPE a.k.a. Shiller P/E ratios of various regions.) If you're like most people and are somewhat wary of foreign investment, you could perhaps do 50% VTSMX and 50% VGTSX (Total International) to keep it simple. Or, if you expect your investments to grow to $100k in the foreseeable future, you might want to start with 50% VTSMX, 40% VDVIX (Developed Markets) and 10% VEIEX (Emerging Markets) instead because this combination will have a lower total expense ratio once you're eligible for Admiral shares of each fund.

[FIREdancer]

Concur with previous responses.

If you have money lying around, "today" is always the best day to invest.  Especially if you are investing in index funds, don't even look at what the market is doing, just invest your money as soon as you have money to invest.

[arebelspy]

Now may not be a GREAT time, but the probability is that it's better than any future time.  You're more likely to end up with more money in the future by investing now than by waiting.  So unless you've perfected that time machine, it doesn't matter if now is a good time... it's the best time you've got.  :)

[Eric]

The best time to plant a tree invest is 20 years ago.  The second best time is today.

[mathjak107]

i have been investing since 1987 . there is never a good time .  we are either in a so called over valued bubble when we are going up or we are plunging in to a doomsday scenario .

there is always a wall of trouble and another hurdle staring at you as you wait for the other shoe to fall .

the truth is just do it. decades later you will likely be quite satisfied .

[fa]

Now may not be a GREAT time, but the probability is that it's better than any future time.  You're more likely to end up with more money in the future by investing now than by waiting.  So unless you've perfected that time machine, it doesn't matter if now is a good time... it's the best time you've got.  :)

Buy and hold, and not timing the market is a true and time tested method.  But that does not mean you should not assess whether the price of what you buy is unreasonably high.  Just like you would not buy real estate at any price because "RE always goes up".  A valuation of the assets you want to buy is always prudent.  The market is currently very highly priced by any historic measure.  The market is so high not just because of amazing corporate results, but also because of the Fed.  With interest rates essentially at 0, people are buying just about anything that might return a profit.  Rising interest rates alone are likely to depress the market as capital would go to bonds and CDs.  Maybe the best time to buy stocks would be when the market has gone through an adjustment.  Short term I don't know what the market will do, but in the medium term a significant adjustment is very likely.  What's wrong with protecting your assets until the inevitable correction happens?

[arebelspy]

Now may not be a GREAT time, but the probability is that it's better than any future time.  You're more likely to end up with more money in the future by investing now than by waiting.  So unless you've perfected that time machine, it doesn't matter if now is a good time... it's the best time you've got.  :)

Buy and hold, and not timing the market is a true and time tested method.  But that does not mean you should not assess whether the price of what you buy is unreasonably high.  Just like you would not buy real estate at any price because "RE always goes up".  A valuation of the assets you want to buy is always prudent.  The market is currently very highly priced by any historic measure.  The market is so high not just because of amazing corporate results, but also because of the Fed.  With interest rates essentially at 0, people are buying just about anything that might return a profit.  Rising interest rates alone are likely to depress the market as capital would go to bonds and CDs.  Maybe the best time to buy stocks would be when the market has gone through an adjustment.  Short term I don't know what the market will do, but in the medium term a significant adjustment is very likely.  What's wrong with protecting your assets until the inevitable correction happens?

Because we don't know what it will do.  Even if you're right that it's overvalued, who's to say we don't see a stagnant market for quite awhile, say, 1-2% annual growth until earnings catch up with prices.  At that point it's no longer overvalued, but you're still waiting for a "crash" to happen, and you've missed out on years of (small) returns, dividends, etc.

A correction doesn't have to look like a crash.  Even if it does, you're likely to lose out. 

There were PLENTY of people in 2010 thinking the 2008 crash was a precursor to the REAL big one.  They sat out, and sat out, and sat out, and missed TONS of gains.  Say you do sit on the side while the market climbs 40%, then it crashes back half of that.. you're still buying in higher than you would be by today.

The point is, even if you think it's overvalued, sitting and waiting is usually a worse move anyways, because you just can't know, and can't time it.  It seems like, on a gut level, it should work, but study after study shows this is just not the case.

[chasingthegoodlife]

Timing stocks is also a little different from timing real estate because most people generally make one RE purchase, locking in that price then paying off over years. With stocks, you can invest smaller amounts over time (dollar cost averaging blah blah blah). If you buy $3k of stocks today , and then the market falls, you can buy another $3k at the new lower price in a few months.