By David Jackson, MBA, CFP®, C(K)P™, Managing Partner – Investments, Southern Springs Capital Group
I’m always intrigued by people who are holding cash waiting for a “better” time to invest. If we were all clairvoyant and knew what the markets were going to do, we would certainly want to take advantage of this by choosing the best times to add funds to our portfolios. But the people who make market forecasts for a living, those that claim to know the good or bad times to invest, would be much richer if they truly could predict those things. Most experts do well to even predict the direction of the market in the short term, much less the magnitude of increase or decline.
Usually, the best time to invest is when you have funds available to invest. I have found through the years that the one thing that gives you the best chance to be successful is time. The longer you are invested, the greater your chance of success.
This is due to two key factors. First is the compounding effect. As your investment earns money, both the earnings as well as the original principal are both earning money.
Second is that markets tend to trend up over long periods of time. Companies are in business to make a profit, and, over the long run, most of them tend to do it. If they don’t, they cease to be in business at some point. Companies that make a profit continually tend to see their share prices rise to reflect that. It may not happen to all companies at the same time, but it tends to happen to all the profitable ones eventually.
When markets are trending downward, I have a lot more conversations with people who are considering selling investments, not adding more funds. If you are sitting around waiting for a market drop before investing, ask yourself “Is a 20 percent drop from here going to be the right time?” Usually, significant or continuous downturns are related to troubling things happening in the world. For most people, they don’t feel like good investing opportunities.
Market predictions and current market conditions should be only minor factors in your decision to invest at any given time. The primary factors should always be the availability of funds and the time needed for that money to grow.
For more information on Southern Springs Capital Group, visit www.southernspringscapital.com. Our offices are located at 2555 Meridian Boulevard in Franklin. We can be reached at 615-905-4585.
Opinions expressed are those of the author and not necessarily those of Raymond James. The information has been obtained from sources considered to be reliable, but we do not guarantee that the foregoing material is accurate or complete. Some investments mentioned may not be suitable for all investors. Past performance is not a guarantee of future results. Investing involves risk and investors may incur a profit or a loss. Holding stocks for the long-term does not insure a profitable outcome. Investing in stocks always involves risk, including the possibility of losing one's entire investment.
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