When is the right time to invest?

Getting your timing right is a decisive factor when investing in financial products: When exactly or over which period should I invest in order to achieve the best possible return? In this article, we highlight some aspects of investing and time.

The right time to invest money in an investment product with the goal of generating the highest profits possible is a topic with many angles. This also comes with plenty of misconceptions. In fact, the factor "time" plays a decisive role in investing, but in a much broader context than you may assume? Why?

A season for everything

Once you've decided to start investing and have done your research on basic questions around personal finance, this is the perfect time to start formulating your own long-term investment strategy. 

There are several things to keep in mind when you’re coming up with your personal investment strategy. What types of products do you want to invest in? What amounts do you want to invest and over what period of time? How do you achieve broad diversification of your portfolio with different products? How high or how low is your personal risk tolerance?  

It’s sad but true: that movie scene where the investor in his perfectly cut suit buys in at the lowest price with a minimum amount and then sells again at the highest price to become a millionaire overnight, normally only happens there - in a movie. In reality, it’s far less often.

Good things (usually) take time

If your focus is on tactics when investing, see if you want to shift to other priorities, such as perseverance, how to level out price fluctuations and generating compound interest with your assets, especially when investing money for long-term projects, such as retirement planning. 

Should you need to withdraw money from investments sooner than anticipated, make sure that the costs incurred are in relation to the investment result. Frequent switching often results in higher fees and can also have tax implications. 

Good times, bad times

Money makes the world go round, literally, in some cases. Far-reaching global economic and political developments may lead to losses for investors with more significant repercussions for investment returns than small fluctuations and losses in between.

So, it makes sense to familiarise yourself with the basics here as well. What is economic growth? How do market cycles in various industries work? What are the likely impacts of those cycles on your investment? What kind of investment is favorable during a certain phase and how does this phase affect different industries?

In the broadest sense, each market cycle consists of four phases: early recovery (production increases, sentiment is positive), late recovery (full capacity utilisation, downturn imminent), downturn (decline in economic activity) and recession (decline in demand, profit declines).  

Interest(ing) times

Different phases of key interest rate policy also affect investment products and their returns in different ways. Since 2008, key interest rates have been relatively low worldwide, making investments and loans attractive for companies as more capital flows into the economy. Price developments and returns on investment products such as shares, bonds and savings accounts as well as demand for real estate are all influenced by low key interest rates.

Time is money

There is one time factor in investing that is certain: In order to earn income with your money, it is important that you start investing in the first place. The right moment to start investing is always and at any time.  

ETFs (exchange-traded funds) are particularly popular as an entry-level investment product for beginners - for good reason. An ETF is a securitised investment product that follows the performance of an index and passively tracks it 1:1.

ETFs are an affordable alternative to buying equity funds and individual stocks. They cover important markets and spread the risk widely across a large number of companies. Thus, investors keep their expenses lower on several levels at once, because you invest less time and money for diversification than you would need to with individual stocks or actively managed mutual funds, where the management of included securities is carried out by fund managers and thus associated with increased costs. 

How to start investing?

With Bitpanda Stocks*, you can invest proportionally in ETFs, such as the Top 500 US Stocks, from as little as €1, commission-free and with tight spreads. This is made possible by derivative contracts covered by the underlying stocks and ETFs.

*Bitpanda Stocks enables investing in fractional stocks. Fractional stocks in Europe are always enabled via a contract which replicates the underlying stock or ETF (financial instruments pursuant to section 1 item 7 lit. d WAG 2018). Investing in stocks and ETFs carries risks. For more details see the prospectus at bitpanda.com.