Is Now a Good Time to Invest?

Is Now a Good Time to Invest? by Nicholas Swezey

The right time to get back in the market may be just around the corner. With global economies sinking, sometimes dramatically, it can be a scary thought to put your hard-earned money on the line. However, a smart investor will realize that golden opportunities are appearing if proper research is done.

If you look at a long-term chart of the Dow Jones average, you will see that it is currently at some of the 2002-2003 levels. It has dropped dramatically since the financial collapse of 2008-2009, but it is still in familiar territory. It may take another two years or more for a large upswing in the markets, but at least we hope that the Dow will not drop below 7,000 points. That may bring hope and some peace of mind about starting to invest again.

Dollar Cost Averaging
The concept of Dollar Cost Averaging comes to mind in the current market situation. It is the process of buying stocks or similar investments on a regular basis, such as once a month, using a fixed amount of money. When prices are low, you are able to buy more shares. When prices are high, you buy fewer. In this way, you are able to take advantage of temporary low prices. This is especially helpful for long-term investments, such as retirement accounts. It may go against human nature to buy stocks when everything is falling and red but in fact it can lead to a bigger payoff if done correctly.

Don't Wait Too Long
As soon as you believe the markets will not drop much more, that is the time to start investing. When an upswing begins, it may happen so fast that you will miss a good portion of it. There are literally billions of dollars of cash on the sidelines, just waiting to go back into the market when the time is right. You can imagine what impact that might have on prices because of a surging demand but limited supply of stocks and mutual funds. Don't wait too long!

Which Companies to Buy
There are a lot of low-priced stocks right now. Don't jump into any old stock just because the price is low. There may be good reasons for it, such as the company being dangerously close to bankruptcy. One popular example is GM. Their stock price has dropped incredibly far. Is it a good deal? The government will probably not allow them to go into bankruptcy because that could have catastrophic affects on the country. Even if they survive, though, they may not thrive, and the stock price might hold its value or drop even more. Nobody can predict the future of GM. This is just an example of how difficult it can be to make a trading decision at the present time.

You also need to consider how the company is adapting to the economy. Are they offering low-price items to their customers? Are they reducing expenses significantly, such as layoffs, to stay in business? Do they have access to enough credit to stay operational? These are very important questions to consider before making a trade.

Will the Economy Get Worse?
This is probably the single most important factor that traders are considering right now. Why put your money into investments if they are just going to drop again? The government is trying hard to stabilize the economy, but there are many experts who believe there is more doom and gloom in the future, with more foreclosures, bank failures, and lost jobs on the way. A lot of this depends on how the government handles the situation and how the public perceives their actions. If the public believes things are stabilized, they will begin to spend and invest again, businesses will have more money and they can hire more people, and the economy can begin to thrive again. When this will happen, nobody knows for sure. Hopefully in 2009 it will, but it may be 2010 or later.



Nicholas Swezey is the creator of the day trading game at HowTheMarketWorks.com.

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Investment In Gold: What's In Store For The Price of Gold And The Dollar?

Investment In Gold: What's In Store For The Price of Gold And The Dollar? by Jet Lee

The media, and even the network news shows, have started reporting the price of gold regularly. For almost 20 years, between 1980 and 2000, the price of gold was hardly mentioned. There was almost no interest, and the price was either declining or stagnant.

Since 2001 however, interest in gold has spiked and so has its price. With the price well over $1000 an ounce, a lot more people are becoming interested in investing in gold and an economic indicator. A lot can be learned by understanding what the rising dollar price of gold foretells.

The rise in gold prices from under $300 per ounce in 2001 to over $1000 today has drawn investors and speculators into the precious metals market. Though many already have made handsome profits, buying gold per se should not be touted as a good investment. After all, gold earns no interest and its quality never changes. It’s static, and does not increase as ideal investments should.

It’s more accurate to say that one might invest in a gold or silver mining company, where management, labor costs, and the nature of new discoveries all play a critical role in determining the quality of the investment and the profits made.

Buying gold and holding it is somewhat similar to converting one’s savings into one hundred dollar bills and hiding them under the mattress, althoughtyet not exactly the same. Both gold and dollars are considered money, and holding money does not count as an investment. There’s a major descrepancy between the two however, since by holding paper money one loses purchasing power. The purchasing power of commodity money, i.e. gold, however, increases if the government devalues the circulating fiat currency.

Hoarding gold is hedge or insurance against government’s proclivity to debase its currency. The buying power of gold goes up not because it’s a so-called good investment; it goes up in value only because the paper currency decreases in value. In our present situation, that means the U.S. dollar is lossing value against gold.

One of the characteristics of commodity money (one that came about organically in the marketplace) is that it serves as a store of value. Gold and silver meet that test, while, but paper money does not. Because of this severe difference, the incentive and wisdom of holding emergency funds in the form of gold becomes smarter when the official currency is being devalued. It’s better than trying to save wealth in the form of a fiat currency, even when earning some small amount of interest, especially when this interest often attracts the highest taxation rate. The lack of earned interest on gold is not an issue once people figure out the purchasing power of their currency is declining faster than the interest rates they might get. The purchasing power of gold can rise even faster than increases in the cost of living.

It's probably a great idea to make sure you diversify a part of your savings into gold bullion or maybe gold-backed securities like the Gold ETF. Investment Advisors advise that people hold 10-15% of their money in gold, although with the current economic situation, I'd definitely aim for the high end of that range.



The writer hosts a site dedicated to Investing & Passive Income and is an avid gold and silver coin collector.

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