When is the best time to invest?

When is the best time to invest?

Unfortunately, there is no such thing as the ideal moment to buy or to enter the market. The financial markets can fluctuate significantly at any time, and that has an impact on the value of your investments. But does this volatility generate such a serious risk that it is better not to invest at all?

In focus: how the stock markets have performed since 2000

There are more good years on the stock market than bad ones.

When you look at the returns generated by a number of stock markets, you'll see that there are many more good years than poor ones*. For instance, the BEL 20 and the world index have delivered positive annualised returns in 12 of the past 18 years. The European stock exchange (MSCI Europe Index) did even better, doing that in 13 of the past 18 years.

Despite the stock market crisis in 2008, if you had invested continuously in these indices since 2000, you would have achieved a total return of:

  • 170.31% on the BEL 20 (or an average of 9.46% per year)
  • 78.36% on the world index (or an average of 4.35% per year)
  • 109.69% on the European index (or an average of 6.09% per year)

In short, had you invested a capital sum in 2000, you could have pocketed an average return of 4.35% a year at the start of 2018, even on the worst performing of these indices.**

* Figures including dividends.
** Past performance is not a reliable indicator of future performance.

An answer to inflation

In these times of low interest rates you don't earn much on your savings. Worse still, your assets are actually losing value.

Lost purchasing power in figures
Lost purchasing power in figures

The cost of living is becoming more and more expensive, which means that you lose purchasing power, i.e. the same amount of capital buys less and less. Even if interest rates were to go up in the years ahead, that would not be enough to prevent your savings from losing value in real terms.

Conclusion

While you're waiting for a suitable moment to enter the market, inflation eats away at your wealth.
Cumulative inflation (01-01-1999 = 100 EUR)

Exactly when you start investing is less important.

Delaying when you start is much more damaging for your return. While you're waiting for a suitable moment to enter the market, inflation eats away at your wealth.

The performance of the stock markets since 2000 illustrates how investing for the long term generates a tidy return.

Even with the poorer performing investment we have discussed here (the European index), it is possible to beat inflation.

In this example, we only discuss shares because their prices fluctuate most and that has the biggest impact on your return. However, when you invest, you can choose from a wide range of different investment products.

Investing is rightly referred to as being made-to-measure: your aim is to achieve a balance between the targeted return and choosing investments that are in your comfort zone.

When you start investing, be sure to keep some money on your savings account as a buffer. In that way, you always have enough in reserve to meet any unexpected expenses, without having to tap into your investments.

How do you know what kind of investor you are?

Not the easiest of questions to answer. That's why we've come up with a test with a few questions that will help you find out your investor type.

That way you can discover the investment approach for getting your assets to work for you while enjoying total peace of mind.
 

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