And the Crystal Ball Says … Invest
by JJ Montanaro, CFP® with USAA
Is now the right time to invest?
You may be watching the markets and wondering if it's a good time to jump into the world of investing. Well, I've got no window into what the future holds, but I can give you a framework to answer that particular question.
Determining the answer has little to do with the markets and a lot more to do with you. In this series of articles, I continue to take the position that good timing is more about being able to do something right than any mark on a calendar or a specific age.
If you can answer these four questions with a resounding “yes,” then it may indeed be the right time to invest.
Have you got some cash? I'm not talking about money to invest, but rather cash set aside in an emergency fund. While I'm fond of the idea of having the equivalent of at least three months of expenses set aside, I don't think you have to be all the way there before starting to invest. Instead, have some money available to respond to something bad happening without having to use credit. It could be as little as $1,000, but it's an important step and will help ensure you're not investing one month only to have to pull the money out the following month because your car broke down.
Are you double-digit debt free? In most cases, it doesn't make a lot of sense to direct your limited resources towards investments while you're carrying a bunch of high-interest debt. No, you don't have to wipe out all your debts before you invest, but getting rid of 20-something percent debt is an investment in and of itself.
Have you marked your multiyear calendar? Remember, investing is a long term proposition. Money you allocate toward this endeavor should be targeted at goals well into the future — years, not days, weeks or months. And yes, you can ignore those day-to-day news headlines. Your focus should be well into the future.
Do you have a plan? Know how much you're going to invest and when; I love payroll deductions into the TSP or other employer plan. Know your investment mix; target or lifestyle funds may simplify things on this front. And know your ultimate goals: what are you investing toward?
Look at those questions again. Absent are any references to prospects for the stock or bond markets, news headlines or expected investment returns. Instead, it's all about you and your situation. If you can say yes four times, there's a pretty good chance that now is the right time to invest.
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Views and opinions expressed by members are for informational purposes only and should not be deemed as an endorsement by USAA. IM2_NET0910_Views_and_Opinions_Blogs
This material is for informational purposes and is not investment advice, an indicator of future performance, a solicitation, an offer to buy or sell, or a recommendation for any security. It should not be used as a primary basis for making investment decisions. Consider your own financial circumstances and goals carefully before investing. IM2_NET0400_Market_Commentary_Legend
Investing in securities products involves risk, including possible loss of principal. IM2_MFND0350_Investment_Risk
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER TM in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements. FPS2_FPC0800_CFP_Symbols_Allowed
The law concerning tax and retirement plans is complex, penalties are severe, and the laws of your state may differ. Consult your tax and legal advisers regarding your specific situation. The information contained is provided for informational purposes only and is not intended to substitute for obtaining professional financial advice. Please thoroughly research and seek professional advice before acting on any information you may have found in this article. This article in no way attempts to provide financial advice that relates to all personal circumstances.
Certified Financial Planner Board of Standards, Inc. owns the certification marks CFP® and CERTIFIED FINANCIAL PLANNER TM in the United States, which it awards to individuals who successfully complete CFP Board's initial and ongoing certification requirements. USAA means United Services Automobile Association and its affiliates.
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Joseph "JJ" Montanaro is a financial planner with USAA's Military Affairs' Advocacy Group and is a CERTIFIED FINANCIAL PLANNER professional (CFP®). He is a native of Kansas City and graduated from the United States Military Academy, West Point, New York.
Montanaro has more than twenty years of experience as a financial planner. He served in the US Army for six years on active duty and retired as a lieutenant colonel in the United States Army Reserve.
JJ's financial advice has appeared in numerous outlets including the Wall Street Journal, USA Today and the New York Times. He writes monthly personal finance columns for Military Spouse Magazine and American Legion Magazine and hosts the USAA Money Drill podcast.
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