When is the best time to invest?

When should I start investing?

Generally speaking, the sooner you can start, the better, because the earlier you start investing, the more time your money has to grow. However, before starting to invest, it’s a good idea to save an emergency fund. That way, if your boiler stops working or your car fails its MOT, you won’t need to sell your investments to cover the costs.

Having an emergency fund might even make you a more confident investor because you’ll be less likely to panic-sell your investments during a downturn.

You might find this helpful: How much should I have in savings?

Before you invest, it’s also a good idea to think about what you’d like to use the money for and when you’ll need to access it. If you’re saving to buy a house in the next 3 to 5 years, it’s generally safer to keep your deposit in cash.

Some people invest their house savings in the hope of a better return, but this could cause problems if you find the perfect property during a temporary market downturn or crash. If this happens, you may have to sell your investments at a loss to avoid missing out on your dream home.

Thankfully, with the help of a Cash Lifetime ISA, you can put your money to work and save a deposit sooner without risking your money on the stock market. Save up to £4,000 per tax year in your Lifetime ISA and the government will boost your savings by 25%, up to £1,000. You’ll earn interest on your savings too - with Tembo, you’ll earn the market-leading rate of 4.30% AER (variable). Find out more here.

Read more: Is an ISA better than a pension? 

You might also like: How to open a Lifetime ISA in minutes

When you come to actually choosing where to invest your money, you need to think about the amount of risk you’re comfortable with.

Higher risk investments tend to offer better returns than lower risk investments (though there are no guarantees), but taking on more risk than you’re comfortable with could lead to sleepless nights and emotionally-driven investment decisions.

If you’re risk-averse, you might be more inclined towards a slow and steady investment portfolio made up of a combination of low-risk index funds, bonds, and cash.

If you have a long investment timeline of 20 to 30 years and won't need to access your money during that time, you may be able to consider a higher-risk investment strategy that could offer greater potential returns. Before doing this, it can be worthwhile to speak to a financial advisor.

Learn more: Active vs passive investing. Which is better?

What is the best time to invest?

There’s no such thing as the best time to invest money. As the saying goes, ‘Time in the stock market is better than timing the stock market.’

Stock market prices can fluctuate throughout the day, meaning you could buy a particular stock or fund in the morning only for it to be worth less than you paid for it by the end of the day. 

However, this doesn’t mean they’ve made a bad investment or invested at the wrong time. For those investing for the long term and building a diverse portfolio, these day-to-day changes won’t matter.

No one knows exactly how the price of a particular stock or fund will change from one minute to the next, but we do know that fluctuations are inevitable.
What we do know is that, over time, stock market investments tend to outperform cash. In fact, looking at the last 30 years, investments have outperformed cash annually by 4%.

When can I invest in a new ISA?

Whether someone can open and pay into a new ISA depends on how much of their ISA allowance for the current tax year they’ve already used. The ISA tax year runs from the 6th April to the 5th April the following year.

• Allowance: Individuals can save or invest up to £20,000 each tax year across different types of ISA, including Cash ISAs, Stocks and Shares ISAs, Innovative Finance ISAs and a Lifetime ISA.
• Before 5th April: If someone has not used any of these accounts this tax year, then they can invest up to £20,000 into a new ISA before the 5th April.
• From 6th April: When the new tax year starts, the £20,000 allowance resets, and individuals can invest another £20,000.

But remember that would mean they cannot put any more money into other ISA accounts until the following tax year begins.

Remember that if you’re a first-time buyer or you’d like to save for retirement outside of a pension, you can save or invest up to £4,000 of your annual ISA allowance in a Lifetime ISA each tax year. Once you’ve maxed out your LISA, any additional savings or investments will need to be spread across other ISA types (so the remaining £16,000). 
Keep in mind that you must have a Lifetime ISA open for 12 months before you can withdraw your savings penalty-free. If you make a withdrawal before you’re 60 for anything other than your first home, you’ll be charged a 25% LISA penalty on the amount you withdraw, which may result in you getting back less than you put in.