Sir John Templeton is one of the founders of Franklin Templeton Investments. When he speaks, listeners often ask, "When is the best time to invest?" He invariably replies, "Whenever you have the money." While past performance is not a guarantee of future results, history has borne him out so far.
Here are some of the reasons why many investors have avoided the stock market over the past 75 years:
- Great Depression
- Pearl Harbor
- Assassination of President Kennedy
- Vietnam War
- All-time-high interest rates in the early 1980s
- Terrorist events of 9/11 and the war on terrorism
- High energy prices
If you look hard enough, you can always find a reason to stay away from stocks. However, we believe an intelligent investor gives more weight to long-term trends than to the daily events that make headlines.
When investing in any kind of security, you face risks. The most obvious is loss of money. But there are other kinds of risk as well -- risks that affect all investors and all non-investors -- like the loss of purchasing power. Obviously, putting your money under a mattress, or in a fixed-income investment may not keep up with inflation -- to say nothing of the additional erosion by taxes.
Why do most investors fail to meet their investment goals? There are three main reasons:
- They have no plan.
- They select the wrong funding vehicles -- investments that don't outpace inflation and taxes over long periods.
- They let their emotions influence their decisions.
The secret to investing is not timing the market, but time in the market.
By investing the same amount of money at regular intervals, you can avoid the temptation to time the market. This powerful long-term investment technique is called dollar-cost averaging. It helps you buy more shares when prices are low, fewer when prices are high.
Dollar-cost averaging in itself doesn't ensure a profit. If you have to sell your shares at a time when their price is lower than the average price you paid for them, you'll have a loss, but it can reduce the price you have to get to break even. Before starting such a program, you should consider your ability to continue buying at periods of low prices.
As mentioned earlier, you can always find a reason to stay away from stocks. Again, past performance does not guarantee future results -- but over the long term, the stock market has risen, and has preserved and enhanced investors' purchasing power. For more information on how investing in stocks and stock mutual funds may help you reach your financial goals, talk with your financial advisor.
Wachovia Securities Financial Network is not a legal or tax advisor. However, as financial advisors will be glad to work with your accountant, tax advisor and/or attorney to meet your goals.
This article is provided courtesy of Kevin Dick, AAMS, a managing principal with Kevin Dick Investments and Financial Services in Payson. Kevin welcomes your comments, and you can reach him at (928) 474-4350. Investment products and services are offered through Wachovia Securities Financial Network, LLC (WSFN), member NASD and SIPC, a registered broker-dealer and separate nonblank affiliate of Wachovia Corporation. Kevin Dick Investments and Financial Services is a separate entity from WSFN, copyright 2007 Wachovia Securities Financial Network, LLC.
Investments in securities and insurance products: NOT FDIC-INSURED/NOT BANK-GUARANTEED/MAY LOSE VALUE