The stock market has plummeted. Is Now a Good Time to Start Investing? This is a question I get a lot right now. The major stock markets and stocks are currently lower than a year ago. On average, they are down about 20 percent since the beginning of this year. It seems attractive to take advantage of this significant dip. The answer to the question is: yes, it is in itself a good time to start investing. But not for that reason. And only if you are well prepared.
To start that preparation. Before you start, you must have a clear idea of why you want to invest. There can be many reasons for this. Maybe you want some extras for your retirement. Or do you want a pension at all, as a freelancer. Or you ever want to have assets to help your kids or start a business. Or maybe you like a challenge and are trying to become financially independent. That’s all possible.
Investing should be part of a bigger money plan. A plan that allows you to look far into the future. All the wrong reasons to invest are focused on the near future. You hope to score a big return quickly now that the stock market is low. The chance that this will succeed with investing is just as great as in a casino. Investing is, if you play it right, a long and boring game. A falling stock market is not a reason to start investing. After all, this falling stock market can continue to fall for a very long time. That is a real risk.
We are currently in a bear market. That is a market where investors are pessimistic and are selling their shares en masse, causing prices to fall and even more investors to be pessimistic. So a self-fulfilling prophecy. This can go on for a long time and become very painful. In theory, a bear market is good news for any novice investor who still has years to build wealth. The longer the bear market lasts, the longer you buy stocks (funds) at predatory prices. One day it will rise again and then you will be rammed.
But in practice I’m not on the table cheering right now. Because who can stand to watch their money evaporate for months, maybe even years and continue to invest cheerfully? No novice investor has such nerves of steel.
Still, now is a great time to start investing, if it’s part of your plan. Because of the current sky-high inflation, your money will only be worth less in a savings account. And there is no savings interest to absorb that loss. However, that decline is almost permanent, while the fall in the stock market is almost certainly temporary. So what to do?
Make a sound money plan. Invest money that you can afford to lose every month and put it in sensible investments, such as globally diversified index funds. Keep investing during downs and ups. Ignore all the stock market news. Log out, have some fun and trust in the future.
Journalist Vincent Kouters makes saving and investing simple. Have a question yourself? Mail to [email protected].