If you are starting out in the field of finance and investment, you may ask yourself a key question: Is it the right time to invest in the stock market? What is the best time to invest?
➡ The answer may well surprise you!
The Illusion of Market Timing
Find the best time to invest Ever since the scholarship has existed, it has been a fantasy. This really means that he is able to predict scholarship prices. And since the first actions were exchanged in 1698 for Jonathan’s Cafe From London, it seems that no one has yet managed to find an unstoppable technique to get there.
❌ So market timing ends up being more of a source of stress, anxiety and frustration. We always feel like you missed the train or got out too early from a position that could have made us gain more. For example, Crédit Suisse conducted a study on the behavior of investors in the field of finance. And here’s how the average investor behaves:
In synthesis, Market timing plays with your emotions Although we should rather try to stay cool and rationally invest in the markets. To help you make the right decisions, it is better to develop an upstream strategy (such as Average cost per dollar), without forgetting to diversify your wallet well.
➡ But if we can’t trust market timing, How to choose the best time to invest?
The best time is now!
✅ The best way to avoid missing the train is to take it as early as possible! Indeed, history has shown us that stock markets are bullish over the long term:
Taking a step back, you can see with the chart above that short- and medium-term volatility is certainly important, but, but, The stock market goes up in the long run. In particular, its indices combine the largest capitalizations on the stock market. So you can achieve an average performance of 8.5%. And that number is robust over time, as it’s a performance measured by economist and Nobel Prize winner Robert Shiller in particular on historical data that goes back more than a century.
Antoine’s advice
The easiest way to invest in indexes is to use ETFs that are indexed to respond to their performance, with very little cost.
And since we are in France, you can even combine them with life insurance or peas to optimize your taxation.
💡 Statistically, the best time to invest was yesterday: Rather than waiting for the perfect time to invest, it is better to get into it as soon as possible.
➡ If you want to go with good basics, you can follow our free training in 7 days!
Invest regularly
❌ Do you know that letting money sleep in your bank account to lose? It’s the effect of inflation that fetters your purchasing power. However, this is also generally the case with risk-free investments that have negative real returns in the face of inflation.
🎯 Take an example to illustrate this phenomenon : You saved €1,000 in your checking account to buy a new piece of furniture next year. However, the furniture market is subject to 10% inflation. After a year, the furniture will cost €1,100, so you won’t have enough to buy anymore.
The strangest approach is therefore invest as soon as possible, regularly and graduallyusing, for example, the DCA method” Average cost per dollar“. This strategy allows you to invest a fixed amount at regular intervals, which smooths out volatility. Not forgetting that it is much easier to live from a psychological point of view.
➡ I tell you about my experience with this investment method here: DCA Strategy – Definition, Advantages and Disadvantages.
The power of compound interests
Time in the market beats timing the market.
Financial proverb
This old adage, which can be translated as “it is better to stay invested in the market than to try to predict it”, has proven true over the years. Research shows that those who stay invested for the long term, with a well portfolio, will generally do better than those who try to anticipate market swings.
Here’s an example with an investment in the S&P 500 from January 2, 2001 to December 31, 2020:
Investing would therefore show a return of +7.47% over this period. While missing even the best 10 days, your performance will more than halve to +3.35%. And at worst -6.81% if you miss the best 60 days.
✅ Especially since remaining invested allows you to use the power of compound interests and distinguish between simple interests:
- Simple interests are calculated only on the initial capital and remain constant over the years. So a return of 7.50% on 100 EUR invested will earn you EUR 7.50 EUR every year.
- Compound interests they are based on the reinvestment of interests generated by you, which increase your capital every year. If we take the previous example, you will receive €7.50 in the first year, then 7.50% of €107.50 in the second year, or €8.06, etc.
💡 This is what it gives if we compare these two types of long-term interests:
The result is final : With the same interest rate, your final capital will be almost 3 times larger after 30 years. And the more significant your performance and your placement horizon, the more the beneficial effect of compound interests will be felt.
➡ We explain the calculation of compound interest in more detail (with a calculator).
Conclusion: Don’t wait to invest
✅ In conclusion, investing in the stock market is the most profitable option to grow your money in the long run. However, this requires a thoughtful approach, a solid plan and some risk-taking. Don’t be intimidated by market fluctuations, but be prepared to invest cautiously. And above all, diversify your wallet well.
➡ To start with the right basics, follow our free training in 7 days and find the best brokers and brokers in our comparison.
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