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Thanks to record-high inflation, geopolitical instability and the first interest rate increases in years, the current market is, simply put, incredibly volatile. Existing investors are making strategic changes to their portfolios, and new investors are unsure if they want in at all. But for those fortunate enough to have disposable funds, is now the right time to get started?
Here are three reasons to wade in — slowly.
1. Time in the market is better than timing the market
Generally, when one starts investing isn’t as impactful as how long one invests. With a long enough time horizon, a well-diversified portfolio, and the power of compounding, portfolio volatility usually smooths out. This has been historically proven repeatedly as it pertains to the stock market.
By contrast, “timing the market” or waiting for stocks to hit a new low or drop from recent highs so that an investor can snag a bargain is risky. Short-term market behavior tends to be unpredictable, with current trends reversing on a dime. Waiting for the “perfect” moment to invest may mean passing up potential gains.
In other words, for many traders in waiting, now is as good a time as any to invest because markets are down. But exceptions may arise for those who need their money soon, as a short-term downturn can wipe out a portfolio overnight. If you are a new investor looking for a long-term “buy and hold” strategy, this is one of the best times to enter the markets and begin investing.
Related: Create More Wealth by Playing the Stock Market
2. Downturns leave more room for growth
Many investors view short-term volatility as a risk that negatively impacts their portfolio. In the short term, this is true: volatility often drags down the total value of one’s investments.
That said, one of the primary ways that the stock market generates returns is when investors buy low and sell high. And what better way to profit off large price differences than buying in…
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