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Sound Advice: August 23, 2023

What’s the Best Time of Year to Make New Investments

Determining the best time of year to make new investments can be challenging, as it depends on various factors, including your financial goals, risk tolerance, investment horizon, and the specific market conditions.  Here are some general considerations to keep in mind when thinking about the timing of new investments:

1.     Long-Term Perspective: The most crucial factor in investing is having a long-term perspective.  Time in the market is generally more important than trying to time the market.  Historically, the stock market has shown an upward trend over the long run, so staying invested for the long term can be more advantageous than trying to time specific points of entry.

2.     Dollar-Cost Averaging: Rather than investing a lump sum all at once, consider using a dollar-cost averaging approach.  This means investing a fixed amount of money at regular intervals (e.g., monthly or quarterly).  This strategy helps spread out your investments over time and can reduce the impact of market volatility.

3.     Avoid Market Timing: Timing the market is notoriously difficult, even for experienced investors.  Trying to predict short-term market movements can lead to costly mistakes.  Instead, focus on your investment goals, risk tolerance, and asset allocation.

4.     Consider Market Valuations: Although market timing is generally discouraged, it can be helpful to consider market valuations.  If stock valuations are extremely high, it might be prudent to exercise caution.  On the other hand, lower valuations may present better buying opportunities.

5.     Tax Considerations: Depending on your residence and local tax laws, the end of the year might be a good time to consider investments to manage your tax liability, such as contributing to a tax-advantaged retirement account.

6.     Company Earnings and Economic Indicators: Pay attention to corporate earnings reports and economic indicators.  Positive earnings and strong economic data may create a favorable investment environment, but it’s essential to consider them in the context of your overall investment strategy.

7.     Personal Circumstances: Your personal circumstances, such as changes in income, expenses or financial goals, may influence the timing of your investments.  Always ensure that your investment decisions align with your financial plan.

8.     Avoid Emotional Investing: Emotions can influence investment decisions.  Avoid making impulsive decisions based on market news or short-term market movements.  Stick to your investment plan and strategy.

 

The best time to make new investments is when you have a well-thought-out financial plan, a clear understanding of your investment goals, and a long-term perspective.  Rather than trying to time the market, focus on staying disciplined and maintaining a diversified portfolio that aligns with your risk tolerance and investment objectives.

N. Russell Wayne, CFPÒ

Any questions?  Please contact me at nrwayne@soundasset.com

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