Four reasons why ‘right now’ is always the right time to start investing

Booming stock markets often prompt people to consider commencing their investment journey. But if you aim to be a long-term investor, the answer should be to put your emotions aside, make a plan for how often you want to invest, and make sure you start building a diversified portfolio today. Here's a few reasons why.
 

Timing the market is impossible 

A key principle of investing is that it is impossible for the vast majority of us to time the market, and data shows that individual investors are typically very poor at doing so. Poor timing is a natural result of swings of human emotions—fear and greed—that are triggered by market gyrations. People are usually least invested and holding the most cash when the market is doing worst (fear!) and piling into the market and holding little dry powder in the form of cash when the market is close to or at a major top (greed!).  

But rather than worry, we can only rely on the fact that, over all long historical timeframes, stock markets have always drifted higher.
 

Start right now and minimise decision-making 

In short, there are two behaviours that ensure "right now" is always the right time to start a long-term investment journey. One is to invest periodically. This will happen automatically if you are investing from a monthly income stream. But even if you are starting with a large lump sum, you can plan to invest the sum in intervals.

The other behaviour is to start with a diversified approach, spreading your investments over several asset classes and, within equities, across sectors, industries and geographies.
 

Having a plan makes it easier to take action 

Deciding what to do with your hard-earned savings can seem like a monumental task. But having a plan in hand shortens the time to getting started and moving toward your long-term savings and investment goals, and getting the returns that the markets can offer.
 

Diversification reduces risk and smooths returns 

A diversified portfolio won’t perform as well as the best performing sectors or industries or some single companies in the market. But on the flip side, a diversified portfolio of uncorrelated assets will reduce the risk of poor outcomes if one asset class or company implodes suddenly. This helps smooth returns and reduce volatility, as asset classes tend to perform differently in varying economic conditions.
 

Avoid regret 

The chief advantage of gradually building a diversified portfolio is the reduction (or even elimination) of decision-making, which will help lower regret. You will build a portfolio that is less vulnerable to market impacts and less prone to impulsive decisions. 

 
Remember: doing nothing is also a decision you may regret. If you remain in an undiversified selection of a few stocks or have funds piling up in a low-yielding bank account, you may experience regret if your investments sour or you miss market opportunities. 

You’ll likely participate in the ‘Next Big Thing’ 

Many times, in many market environments, strong broad market returns are driven especially by particularly strong sectors or industries, like pharma in the 80’s and 90’s, information technology over the past couple of decades, and AI for the past few years. Your diversified portfolio will have exposure to these key sectors if you own the broader market.
 

But what about the risks? 

No course of action is without risk. The approach outlined above has one overriding risk for those with a lump sum to invest—that the market continues to outperform before you’re fully invested. This would lead to a higher average price for your investments.