When is the Best Time to Enter the Stock Market

Deciding the best time to put your money into the stock market can be challenging, especially if you’re just beginning your financial journey. Reaching out to experts like those at HCR Wealth Advisors is a good place to start.

Arguably, the most important thing to consider when deciding on the right time to enter the stock market is knowledge. Understanding the requirements of investing can make it easier for you to make up your mind.

Managing your own investments means taking the time to study and thoroughly research stocks that look interesting. This research is a good starting point for beginning investors. The key, however, is consistency. If you aren’t able to commit the time to researching on an ongoing basis (this isn’t a one-time task), you may not get the information you need to make an informed decision. Getting the most out of the stock market means keeping up to date on market movement and trends with continual research and evaluation.

In addition to research, I never hurts to brush up on your math in order to get the most out of the financial reports (annual, quarterly, etc.) that are required reading for any self-managing stock investor.

Third-Party Financial Advice

While some beginning investors might look to a neighbor or friend with an affinity for ‘playing the markets’ for third-party financial guidance, those serious about generating a profit generally reach out to financial services firms like HCR Wealth Advisors for advice.

Financial services firms can also help forecast investment results to give you an idea of what your financial future will look like. They can also help you make the right decisions with your money to reach your financial goals as effortlessly and efficiently as possible and that can translate into extra earnings. Recent studies have shown independent investors can earn lower returns (3.49% annually) compared to investments through financial services firms like HCR Wealth Advisors (average of 7.81% annually) for the same period.

How Much Can You Afford

It’s crucial to have a clear understanding of how much you can safely afford to invest, and that means knowing how much you can afford to do without.

Because the stock market is a long-game, look to invest money you won’t need to touch for at least five years. Expect to see dramatic increases and decreases during that time, as well as the market has been known to sometimes bounce up 1,300 points, or drop almost 1,000 in a matter of days.

Investing Basics

If you plan on investing in stocks, you’ll need to open a brokerage account. But before you do, you’ll need to determine the type of account that best fits your situation.

Most people choose between a standard brokerage account and an individual retirement account (IRA).

Brokerage Account

If having easy access to your money is essential or if you’re investing for a flexible financial goal such as a rainy-day fund, a standard brokerage account is often a smart choice.

Individual Retirement Accounts (IRA)

If you’re focused on building your retirement fund, you’ll likely opt for an IRA. Whether it’s a traditional or Roth IRA, they come with tax-advantages that can make investing more manageable but remember if you need to access your money before retirement, IRA holders have to pay a 10% tax penalty for early withdrawal.

  • A 401(k) is a retirement account where you put money in before you pay taxes on it. That means 100% of what you deposit into the account is invested and has a chance to grow over time. With a 401(k), you pay tax when you withdraw the money.
  • A Roth IRA is a different type of retirement account and is an ideal option for long term investing. Unlike a 401(k), a Roth IRA uses after-tax dollars. That means the money you are spending has already been taxed, so you won’t pay tax again when you withdraw it.

Stock Choices

Once you’ve opened your account, your choice in stocks can affect when it’s the right time to invest.

Some questions to consider when weighing whether or not to invest include:

Can you diversify?

Spreading your investments can ease the impact of individual stock fluctuations.

Do you have business or industry knowledge?

Knowing how a particular business or industry works can help make informed choices about investing.

Are the stocks you’re interested in exceptionally volatile?

Volatile stocks can require more management and be less likely to generate profit.

Do you understand the basic concepts and metrics used in stock evaluation?

Having basic knowledge not only can help you improve financial results; it can also reduce the stress associated with stock market investing.

Keep on Investing

Investing in the stock market is a long-game. When you leave your money in a well-managed and carefully strategized investment account, your returns begin to compile interest without requiring additional effort from you. This is another area where an advisor can be a great asset to your financial toolkit. Having an experienced investment professional, like HCR Wealth Advisors, means having someone in your corner who’s “been there and done that.” That knowledge and understanding can translate into a comprehensive market knowledge and understanding that may otherwise fluster younger, less experienced advisors.

Bull vs. Bear: When Is the Right Time to Enter the Stock Market?

Both a bull market — a rising, economically-sound market — and a bear market — a receding market full of stocks that are declining in value — can both offer benefits to investors.

Bull Market: Skyrocketing Stocks

Because of a Bull market’s typically high consumer spending (an indicator of a healthy economy), rising stock prices and low unemployment rates, investing when stock is ‘up’ is often viewed as the best time to invest.

But bulls carry their own cautions including unsubstantiated rumors or ‘hot tips.’ Bull markets always seem to spark stories of overnight millionaires based on a supposed ‘hot tip.’ While overnight successes can occasionally occur, more often than not, there are critical details in play that are overlooked by novice investors.

Because they are dealing with the market on a daily basis, financial services firms can often quickly discern the validity of any rumored tips, helping you decide whether moving on them or not will be in your best financial interest.

Bear Market: Buy Low and Sell High

Everyone has heard the advice that you should buy low and sell high for stock market success. While the base principle is correct, knowing when a stock is genuinely ‘low’ or ‘high’ can be a challenge for beginner investors.

The more likely benefit of investing in a bear market is finding bargains. If you have been watching individual stocks for some time and are well-versed in their activity and their financials, catching them at a lower point can be an excellent opportunity to save money on a purchase you were already planning on making.

About HCR Wealth Advisors

Not all financial advisors are created equal. The varying levels of training, education, experience, and expertise that each financial professional has makes a significant difference in the quality of the advice and recommendations they will provide. The good news is, experienced and professional financial planners, like those at HCR, can generally improve the quality of your decisions.

Who Is HCR Wealth Advisors

Established in 1988, the experts at HCR Wealth Advisors have dedicated the last thirty years to carving out a reputation for objectivity and empathy within the financial planning world. They’ve done this by providing genuinely independent, comprehensive financial services that are supported by broad experience and a deep-seated commitment to cultivating lifelong relationships with clients.

HCR Wealth Advisors can help you create an effective, regularly updated financial plan that can adapt to the changes in your financial life. Their focused, ongoing maintenance allows you to keep on the track toward achieving your goals.

The firm understands that every client is unique and that’s why they use their proprietary financial management framework called.

In-depth financial planning, investment management, estate planning, risk management, tax strategies, cash management, philanthropy, thought leadership, and business consulting services are all part of HCR’s commitment to helping clients move toward their financial goals with confidence.

Whether you’re a high-profile professional, high net-worth family, small business owner, or a newly single, first-time investor moving through a divorce, HCR Wealth Advisors can help you navigate the landscape of both bull and bear markets and help set your investments up for success.

If you have questions about the market or are curious about whether you’re ready to invest, reach out to the professionals at HCR Wealth Advisors and let them put Clarity Formula to work for your financial future.

Originally published at: marketwatch.com on March 5, 2020.

*This article is for informational purposes only and should not be considered investment advice.