Waiting for the Right Time to Invest? You Might Be Waiting Forever

Investing always seems easier in hindsight.

Looking back, there are obvious times when markets were cheap and equally obvious times when they appeared expensive. The problem is that those opportunities rarely feel obvious when you are actually living through them.

When markets are falling, investors worry they could fall further. When markets are performing strongly, there is a fear they have already run too far. Add interest rates, inflation, geopolitical events and economic uncertainty into the mix and there is almost always a convincing reason to wait.

For investors sitting on surplus cash, this creates a common dilemma. Do you invest now or wait for a better opportunity?

There Is Always a Reason Not to Invest

Investment markets have dealt with recessions, wars, financial crises, pandemics, political uncertainty, inflation and rapidly changing interest rates. All have created periods where investing felt uncomfortable, yet markets have continued to grow over the long term.

This does not mean markets move upwards in a straight line. Volatility and periods of negative returns are an unavoidable part of investing.

There will almost always be something making investors nervous, whether it is:

• Interest rates and inflation

• Global conflicts and political uncertainty

• Concerns that markets are overvalued

• Fears of recession

• Markets falling sharply or reaching new highs

  
  

The difficulty is that waiting for uncertainty to disappear usually means waiting until markets have already responded to the good news. By the time the economic outlook feels comfortable again, investment prices may have moved considerably.

Cash Can Feel Safer Than It Really Is

There are plenty of good reasons to hold cash. Emergency reserves, upcoming expenses and short-term financial commitments should not generally depend on investment market performance.

The problem occurs when cash intended for long-term investment remains on the sidelines indefinitely because an investor is waiting for the perfect entry point.

Cash provides certainty of capital in the short term, but it also carries an opportunity cost. Over longer periods, inflation reduces purchasing power and investors may miss market growth while waiting for a correction that may or may not arrive.

This is where having a financial plan becomes important. Rather than simply deciding whether cash or investments are more attractive today, an adviser can help determine how much cash genuinely needs to remain available and how much can be invested towards longer-term objectives.

Investing Doesn't Have to Be All or Nothing

There is also a misconception that the decision is simply whether to invest everything today or do nothing.

For someone with significant surplus cash, there are other ways to manage the decision. Depending on the circumstances, this could include progressively investing over an agreed period, maintaining an appropriate cash reserve, rebalancing existing investments or directing new money towards asset classes where the investor is currently underweight.

The appropriate strategy will differ from person to person. The important point is that uncertainty does not necessarily require inaction.

A good investment strategy should be designed with the expectation that markets will sometimes be uncomfortable.

Your Broader Financial Position Matters

Investment decisions should rarely be made in isolation.

For a business owner, a large portion of their wealth may already be concentrated in their business. An executive may have significant exposure to shares in their employer, while a property investor may have millions of dollars tied to the Australian residential property market.

Looking only at an investment portfolio can therefore give an incomplete picture.

A financial adviser should consider the investor's entire position, including:

• Superannuation

• Property

• Business interests

• Personal investments

• Debt and cash reserves

• The structures through which investments are held

  
  

Sometimes the best investment decision is not simply choosing another investment. It may be improving diversification, reducing concentration risk or determining whether additional capital is better invested personally, through superannuation or another appropriate structure.

As wealth grows, these broader decisions can become just as important as the underlying investments themselves.

Good Advice Is About More Than Picking Investments

One of the misconceptions about investment advice is that its value sits primarily in selecting investments that outperform the market.

In reality, there are many other decisions that can have just as much influence on a long-term outcome.

How much should remain in cash? How much investment risk is appropriate? Should available capital be invested immediately or progressively? Is the overall financial position genuinely diversified? And how should investments be structured?

An adviser can also provide something that is difficult to quantify but incredibly valuable over time, which is perspective.

Some of the most damaging investment decisions are made during periods of extreme optimism or pessimism. Investors chase markets after strong performance, sell after significant falls or allow short-term news to override a strategy designed for decades.

Having someone there to challenge those decisions, provide context and keep the strategy connected to long-term objectives can be just as valuable as the investment selection itself.

Sometimes good advice means making a change. At other times, the most valuable advice can be explaining why no change is required.

Time in the Market Still Matters

For long-term investors, the objective is not to find the perfect day to invest. It is to build and maintain a strategy that gives capital sufficient time to work.

There will always be another election, interest rate decision, economic forecast or geopolitical event capable of creating uncertainty. Waiting until there is nothing to worry about is unlikely to be a successful investment strategy because that environment rarely exists.

Instead, the focus should be on getting the fundamentals right. An appropriate level of risk, genuine diversification, sufficient cash for short-term requirements and a strategy you are comfortable sticking with when markets become volatile.

Key takeaway

Nobody consistently knows what investment markets will do next.

That does not mean investors should ignore valuations, economic conditions or market risks. They all matter. What it does mean is that investment decisions should be made within a long-term strategy rather than based solely on whether today feels like a comfortable time to invest.

Holding some cash can be sensible. Waiting indefinitely for the perfect opportunity can be costly.

The value of good financial advice is not predicting the next market high or low. It is helping you build a strategy that does not require you to.

Oakmont Financial Group is a specialist firm dedicated to providing Financial Advice that helps you feel confident about your future. If you would like to discuss your financial goals for the year ahead and beyond, you can book a meeting at a time that suits you (including outside standard hours) via our online calendar.

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The information contained on this website and in this blog-post is general in nature and does not take into account your personal situation or circumstance. It is recommended that you consider and use the information provided responsibly, and where appropriate, seek professional advice from a financial adviser.

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