Whether you invest money personally or are a business owner using investments as an additional revenue stream, putting money into stocks, crypto, bonds, or FX makes sense. This is because investing can offer much better returns than parking your cash in a high street bank! However, one issue that many investors battle with is knowing when it’s the right time to make their move.
With the world’s financial markets changing so rapidly on a daily basis, this is not always as easy as it seems. So, how do you know when you should invest?
Inflation is high
Most people have heard about inflation a lot recently, as rising inflation levels have made the headlines. Knowing more about key economic factors like this, and what causes inflation, is a smart move for any investor. This is because you’ll understand not only how it works, but also what potential impact it will have on your investments.
Although high inflation levels are generally seen as a bad thing, they can mean that it is a good time to invest. This all comes down to the fact that investing can be a way of beating inflation. If the potential return on any investment you plan to make is higher than the rate of inflation, choosing to go ahead protects your money from being devalued. This is not true if you keep it in the bank or keep cash at home.
GDP figures looking positive
Another important economic indicator for any investor to know about are GDP figures. This can be national GDP numbers, which show an overall picture of how any country is performing financially, or global GDP data, which does the same thing but on a worldwide basis.
But how can GDP figures signal that now is a good time to invest? If the numbers paint a positive view of the economy, then this could be a sign that the climate for investing is also good. This is because people will spend more in a thriving economy and this could help the share prices of the companies you invest in to rise. Financial markets in general also react well to positive GDP figures, and this could signal that the current climate is a good one for investors.
Another way to know it might be a good time to invest is to simply spot an opportunity that you think will work out. This could, for example, be a stock that you think is about to rise in value from the data shown on its price action chart. Or you could be looking at investing in real estate and have found an up-and-coming area to buy property in.
As all investors know, it is crucial to take advantage of opportunities when they appear and not get left behind. The key point is that you need to have done thorough research of your own and have a strong factual basis for believing that now is the right time to invest.
Asset seems to be undervalued
Investing money into any asset is about buying low and selling high. This sounds easy but it is usually tough to time the markets correctly. It can, therefore, be a better idea to look at whether an asset you plan to invest in seems undervalued.
This gives a much clearer idea of where it is in terms of current price and future performance. If you spot an asset that seems undervalued and might rise in price, it could be a great time to invest.
Spare cash to use
Whilst much of knowing when to invest rests on your analysis of the markets and the assets you plan to put money into, there are also personal factors to consider. A good example is whether you have spare money to invest that you do not need for anything else. If you do, then it could be a great time to invest before you end up using it for something else.
You should also consider whether you can afford to leave this spare cash parked in an investment for a long period of time. Most investments are best left to run for around five years, as this gives them time to reach the returns you target and ride out any bumps in the market. If you are in a position to invest for the long term, it might be a great time to go for it.
When is the right time to invest?
Choosing to invest some of your spare money is a wise decision and can bring handsome returns. However, some investors find it tricky to time their entry into the market and they may worry about picking the right time to make their move. The above points show a few handy ways to know when the right time to invest is, and they should help you decide when to start trading.