Is now a good time to invest?

In theory investing is pretty easy. Buy when the market is down, sell when it's up. In practice, this is easier said than done. How do I know for sure if the market has reached the bottom?

The answer is rather simple: We do not know. In fact, nobody can predict how the financial market will develop in the coming days or months.

However, at the end of this article you will understand why today is the perfect day to get started, if you follow some very easy rules. Before we get to that point, let's dive into the hard facts that paint a clear picture why timing the market is game of luck rather than skill.

5 reasons you can't time the market

1. Historical evidence
   Various studies conducted by Financial Analysts Journal, Journal of Financial Research and portfolio rating agencies like Morningstar have shown that it is nearly impossible to time the market successfully compared to simply staying fully invested over the same period of time. Professional investors, fund managers and even your financial gurus on youtube can't outdo the silent, steady growth of market indices over time.
2. Missed Opportunities
   Imagine you're at a party, stepping out for a break, only to miss the best song of the night. Similarly, by stepping out of the market trying to avoid losses, investors often miss out on the market's best days that often come right after the worst drops. The past has shown that the best trading days often happen right after the worst. In fact, missing the 10 best trading days over decades of investing can reduce your return by half! You don't believe us? Check out this and this study.
3. The costs of trading
   Investing costs! Commission costs, stamp duty, taxes, ... . The financial industry is creative when it comes to hidden costs. The more you actively manage your investments, the more you will pay at the end of the day. These expenses can quietly eat away your investment's potential.
4. Emotional Pitfalls
   Our emotions are often our own worst enemy when it comes to investing. Behavioural economics shows us that fear can prompt hasty sales, while greed can lead to buying at peak prices — decisions often made too late to be profitable.
5. Markets move faster than you can act
   Lastly, the speed at which markets react to new information is dizzying. By the time you've read the news and decided to act, the market has often already moved. Information travels at the speed of light, and individual investors are competing against algorithms that can react in milliseconds.

Understanding these reasons helps us realise that consistently beating the market by timing it may not just be challenging; it might be next to impossible for most.

Why you shouldn't be worried of crises

The market has always been unpredictable. Be it the Dot Com Bubble, the Global Financial Crisis of 2007, the Corona Crisis, or the geopolitical tensions like the current Israel-Hamas conflict. If one thing is for sure the financial market went through many crises and also will go through many more crises in the future.  

There is an old saying in the financial world “Bull markets take the stairs, bear markets take the lift”. Simply put, this means that the market drops are very noticeable, while the market recovers very softly without people actually noticing it.

Let’s look at some examples:

• The Dot Com Bubble (2000 to 2003): The S&P 500 saw a decline of 47%, taking about 1,515 days to climb back.
• The Global Financial Crisis (2007): Here, the S&P 500 plummeted by 56%, requiring 1,286 days to rebound.
• The Covid Pandemic (2020): The S&P 500 dropped 34%, yet the recovery was swift, taking just 141 days, largely due to unprecedented fiscal and monetary interventions.

These past scenarios demonstrate that although recoveries can vary in speed, the market has shown a remarkable ability to heal over time. Particularly with the Covid crisis, the pace of recovery was accelerated, partly due to swift and significant support from governments and central banks worldwide.

While crises are an inevitable part of the economic cycle, they have not prevented the long-term trend of market growth. This historical perspective offers a reassuring reminder: despite short-term fluctuations, the market has a proven track record of resilience.

Why today is a great day to invest?

As you have learned by now, nobody can predict the future and tell you for sure if we have hit rock bottom, nor can anyone assure you that a bear market is not on the horizon. However, this uncertainty should not deter you from starting.

Today is a perfectly fine day to begin investing if you follow some basic rules:

• Invest if you intend to keep your money invested for the long term (at least 5-10 years).
• Invest if your finances are in good shape and you are not compelled to sell your investments at an inopportune time.
• Invest if you've already set aside some money for emergencies.
• Invest if you're prepared to withstand the ups and downs of the financial market.

Crises are part of every investor's journey. The secret to getting through them is to stick to your plan and think long-term. In the end, the worst you can do during a crisis is to heed your emotions. Fear, panic, but also greed and euphoria, are the worst advisers. Don't sell when the market goes down, and try not to get greedy and invest more when the market goes up.

That's why we recommend investing regularly (for example, monthly) and in a globally diversified portfolio. This way, you can even see a downturn in the market as an opportunity because if you think long-term and stay invested, you are buying investments during a crisis at a lower price, which will enhance your returns in the future.

So what is stopping you to get started today?