I think if you were to ask most investors when the best time to start investing is, they would tell you 'now'. Not necessarily now as in May 1, 2020. But now in the timeless sense. In other words, 'now' would be the answer to this question regardless of when it was asked.
I would also be one of those investors to answer 'now' if asked. Generally, the sooner you commence your investing journey, the better off you are in the long run. There's plenty of evidence out there to back this up.
Waiting for the market to fall?
Sitting on the sidelines trying to time an investment can easily see you missing out on that investment and its future returns. This happens to people waiting for the share price to drop just a little lower, with an arbitrary purchase price anchored in their mind. Or maybe they're waiting until the uncertainty of COVID-19 clears. Or when the likely recession is over. But by that time, the sentiment will already be reflected in the higher share prices.
Don't think that will happen to you? You're not alone. But emotions take over and soon shadow the logical thinking part of your brain. Often without you realising.
Not buying the shares today because they have risen 10% or 20% in the last couple of weeks can often lead you to not buying the shares at all. I've been there. Falling victim to my emotions. However, I'm slowly learning to control them. Learn to listen to your logical mind instead, and hold firm to the convictions it's made. It knows better than your impulsive, emotional mind. Strengthen your mind's 'system 2' if you're familiar with Nobel laureate Daniel Kahneman.
Many investors anchor their purchase price to a recent low the shares have traded at. Hoping to be able to buy the shares at that price, but usually not having bought them when they actually traded at that price. Thinking next time the shares drop back down (if it happens) they will pile in. But next time is always different, and a crashing share price can be scary to buy.
Nonetheless, remember you're buying a business. A business which probably didn't materially change over that short period of share price volatility.
The 1st of May
So 'now' just so happens to be May 1, 2020. However, I believe it to be the best time to start investing for an additional reason.
Looking back at any share market crash, investors who continued to invest throughout it have been strongly rewarded.
The All Ordinaries (ASX: XAO) is down 23% and the S&P/ASX 200 Index (ASX: XJO) is down 22% from highs back in February, along with many great Australian businesses. Some are down further. Sure they were sitting even lower in March and may drop to those levels again, or even further.
No one knows, and I believe they're fooling themselves if they think they do. Don't let them fool you too. The one thing I know is that I don't want to be caught on the sidelines.
