The stock market, just like any other market you might consider investing in, has its ups and downs. Because it has close correlations with other markets such as commodities, foreign exchange, derivatives or futures, there are also a lot of things you have to consider after you’ve made the decision to invest. Historically speaking, the stock market did perform in cycles. Does this mean that there is a “good” time to start investing in stocks?
To put it very simply, the answer would be yes. The U.S. economy has known periods of inflation and deflation in the last hundred years. The current general consensus is that an inflation rating around 2% is actually beneficial for the economy – as weird as this might seem at first. Inflation has a great impact on the main interest rates in a county, and these have a big impact on the investment opportunities. Let us detail:
If the interest rates would be high, banks and large financial institutions would rather keep their money in deposits or bonds than invest them in riskier assets. As interest rates drop, the stock market seems more and more attractive to investors. Ideally, you’d like to begin investing in the stock market in a period where key interest rates are close to 0. When considering 2016, given the current state of affairs and the fact that the FED will probably raise their main interest rates soon, the best time to act would be … now.
Of course, these all depend on the size of your portfolio. If you’re managing your own investments, choosing the right time will have far less of an impact than other things – like correct balance and allocation, taxes or commissions. Actually starting to invest and buying stocks in different companies as soon as possible will get time on your side – a very important ally in the investment world. So, to sum up, don’t spend too much time thinking about whether or not you’re picking the greatest moment to invest in the stock market or not. Focus on what you can change and the decision you can make for your investing future, watch your progress closely and start early.