stock market

With many stocks trading at all-time highs, some people are wondering if they really should invest money in the market right now. Is it a good idea to invest if the Stock market is at or near its all-time high?

The most important factors to decide whether you should invest money now.

Before making a decision, you should consider two factors: your own Risk appetite and the Investment horizon. It is also worth taking a look, what resulted from investments at previous all-time highs. Historically, there has rarely been a bad time to invest money, provided that it is money intended for long-term investments is determined.

Risk appetite

Some people have a insatiable tolerance to investment risks: No amount of Bitcoin tokens or GameStop shares is enough. With others, it is exactly the opposite. Regardless of the type of investor, one should consider the Assess risk from the point of view of your overall portfolio. That is, one should consider one’s own entire financial situation and assign risks from there.

There are two key characteristics of risk tolerance: Ability, risks and the Willingness, risks to enter. If you are a multimillionaire, then you may have an above-average risk ability, but perhaps not the willingness to do so, because you feel that you do not gain much from it. In another case, an investor may have a very high risk appetite, but has other obligations that dissuade him from such a strategy. Simply put, risk tolerances vary widely.

When investing there is also a psychological risk: Some people can literally do not sleep at night, because you know that your money threatens to lose value. The most famous is stock market risk in the form of Volatility or the Tendency for assets to fluctuate (at least in the short term) in both directions. One should be careful before taking more risks than one can personally bear.

investment horizon

With regard to the time horizon, one should only invest money on the stock exchange, which one at least three years does not need. Some experts even argue for five years as a minimum period. Regardless of whether you want to use the money in six months for a down payment for a house or a high tuition bill – this money should not be invested in the stock market.

One of the keys to determining one’s time horizon for different amounts of money is the Preparation of an asset allocation as part of a complete financial plan. You can start with an emergency fund. So money to cover short-term expenditure in the event of job losses or other emergencies.

From there you can take a Build a portfolio of stocks, bonds and other investmentsthat reflects one’s ability to take risks over certain periods of time. Funds in a children’s education fund to be used in several decades can be invested as a long-term account, while funds intended for home renovation next year require short-term management.

In short: A long time horizon – say at least five years-is a sign that you are ready for a stock investment.

Invest even though the market has reached an all-time high?

Bears watch out: The fact remains that the exchange has rarely lost money over long periods of time. If you had invested money at all the previous all – time highs – despite the crazy volatility that can often be found in between-you would still be ahead.

Investing now has some important advantagesile. First, the earlier you invest, the sooner you can, for example, receive dividends and accumulate more shares. This is the Essence of compounding. By the Interest on assets many investors are shocked at how quickly money can grow.

Invest but have a strategy

The stock market can without question make people very wealthy. However, only if you stick to the basics: invest early and often, only if you have to sell it, invest as long as possible. But before you do this, you should be yourself thoroughly look at the whole financial picture and be completely honest with yourselfwith regard to one’s own risk appetite and relevant investment horizon. If everything is in order, then you can calmly proceed confidently and invest now.

Last updated on July 21, 2021

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