Wondering whether to invest now or hold off? It's one of the most common questions we hear, and the answer is more nuanced than most financial advice suggests.
The Case for Investing Now
Time in the market beats timing the market — this is one of the most well-supported findings in financial research. A study by Schwab found that even if you invested at the worst possible time each year (the market's annual peak), you'd still outperform someone who stayed in cash over a 20-year period.
The math is simple: markets trend upward over time. Every day you wait is a day of potential compound growth you're missing. The S&P 500 has returned roughly 10% annually over the past century, including depressions, recessions, pandemics, and wars.
The Case for Waiting
That said, there are legitimate reasons to be cautious. Current valuations are historically elevated, and certain sectors may be priced for perfection. If you have a short time horizon (less than 5 years), market timing matters more.
The Middle Path: Dollar-Cost Averaging
If the idea of investing a lump sum right now makes you uncomfortable, dollar-cost averaging (DCA) offers a practical compromise. By investing a fixed amount at regular intervals — say, monthly — you naturally buy more shares when prices are low and fewer when prices are high.
DCA doesn't maximize returns in a rising market (lump sum investing does), but it manages emotional risk, which is arguably more important for most people.
The best investment strategy is the one you'll actually stick with. If DCA helps you sleep at night and stay invested during downturns, it's the right strategy for you — even if the math slightly favors lump sum.
Bottom Line
If you have money you won't need for 10+ years, the evidence overwhelmingly supports investing it now rather than waiting. If you're uncomfortable with that, use DCA to ease in over 6-12 months. The one thing you shouldn't do? Nothing.