Value of Waiting to Invest
Original post by Dennis Hartman of Demand Media
Investors need to make several important decisions involving how they manage their finances, including not only which investment products to buy but also when precisely to invest. A slight change in timing can mean the difference between a profit and a loss. While investing early gives investors more time to realize gains, waiting to invest can have its own benefits.
One reason that some investors choose to wait to invest is a downward trend in the markets where they plan to place their money. Investors rely on the basic principle of buying low and selling high, which means that the best strategy involves investing in assets when they're at their lowest value. Investors may target individual investments, such as stocks or commodities, and wait for them to reach predetermined low prices before buying them. In other cases, investors wait for external factors to affect markets before investing.
Time for Analysis
Waiting to invest gives an investor more time to perform an analysis of investment opportunities. Investors who receive phone calls or email from brokers or advisers may feel pressure to invest quickly without performing in-depth research. However, investors who carefully examine their investment targets and adjust their expectations based on what they learn can select the best investment opportunities and will be more informed as they manage their investments.
Whether prices are rising, falling or remaining stable, market uncertainty can cause investors to hold off on investing in a certain business or industry. For example, if the federal government is planning to introduce new regulations for banks, conservative investors may wait to learn details about the new rules before buying bank stocks that are likely to see changes in value once the new regulations come to light. This factor is especially important to investors with short time horizons, who need their investment money to be available for spending soon and can't afford to invest in volatile markets without first waiting for them to stabilize.
Keeping Current Assets
Investors with diversified investment portfolios may wait to invest in a specific product or area in order to give their current investments more time to grow. Borrowing money to make a new investment incurs the cost of interest, and selling current assets to pursue an investment opportunity can be especially risky when the investment you sell has the potential for growth. Businesses that need to raise capital may wish to keep their cash savings rather than invest them to improve their fiscal stability in the eyes of investors and lenders.
- Schwab Center for Investment Research; The Costs and Benefits of Waiting to Invest; January 2000
- Jakarta Globe; Analysts Say Wait To Invest in Asia's Distressed Assets; April 2009
- Financial Sense; Smart Money May Still Be Waiting to Invest; Richard Russell; June 2011
About the Author
Dennis Hartman is a freelance writer living in California. His work covers a wide variety of topics and has been published nationally in print as well as online. Hartman holds a Bachelor of Fine Arts from Syracuse University and a Master of Arts from the State University of New York at Buffalo.
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