This story is part ofCNET’s coverage of how to make smart money navigates an uncertain economy.
I’ve covered the stock market for 16 years and let me tell you: It’s fickle.
In 2006, I began a new role as a financial correspondent reporting from the trading floor of the New York Stock Exchange. My job was to understand why the market had an up or down day. In the morning, I interviewed mostly male, older, and white brokers who were tasked with actively buying and selling stocks on behalf of large institutional investors. (Also true: I had to remember to wear closed-toe shoes and a jacket. The dress code was strict and a little ridiculous back then.)
I learned that if tech stocks were down shortly after the market opened, it could be due to lower-than-expected earnings the night before from a company like Apple. Any hint of worse times ahead for the industry would trigger a panic among brokers to dump the stock at the opening bell.
“Today’s stock prices are not driven by how businesses are doing today,” Matt Frankel, a certified financial planner and contributing analyst for The Motley Fool, said in an email. “They are based on future expectations.”
That’s the problem: The market doesn’t reflect reality. It gauges the moods and attitudes of people like the brokers I interviewed. Current prices can serve as a measure of investor confidence, but stock market predictions are educated guesses at best. “Markets aren’t always right,” says Liz Young, head of investment strategy at SoFi.
But don’t let that stop you.
While the stock market represents an elite class of investors (the richest 10% of Americans own 89% of stocks), over time it has proven to be a reliable wealth creator for anyone with the tools and information to try it. And technology has made it cheaper and more accessible, meaning a whole new generation has the chance to start investing and building wealth. If you can afford your basic needs and have some emergency savings set aside, there’s no better time to invest than now, even if it’s just a little each month.
Of course it’s natural to wantwhen there is so much economic uncertainty and market volatility. If you’re on the fence about investing, that’s because you are , or you don’t feel comfortable taking any financial risks right now, you’re not alone. More than 40% of Americans polled earlier this spring said the bear market plunge had them too scared to invest.
But waiting for that is an even bigger risk. Here’s what I know for sure about how to overcome fear and invest in success.
The “right time” to invest is right now
Yes, the market is risky. Yes, there will be more crashes. However, there is a high probability that the market will recover, just as it did (and then some) several years after the global financial crisis of 2007-09.
“Things will get better. They always will,” as my friend David Bach, New York Times bestselling author of The Automatic Millionaire, told me on my So Money podcast.
Sure, it’s better to buy low so you can cash in as much appreciation or compound interest later. But since it’s very difficult to predict where prices will go, the “right time” to strike is often something we only realize with hindsight. Waiting to invest until what seems like the right time when you think the stock has bottomed out can set you up for more failure than success.
Your time in market is more important than timing market. Lying low until the stock recovers means you’ll pay more. Instead, invest consistently and continuously and let compound interest grow. You will buy lows and highs, but eventually you will come out ahead over the years. “If you’re in your 30s, 40s or 50s and you’re not going to retire in the next year or two, guess what? Everything goes to shit,” Bach said.
For example, if your parents invested $1,000 in 1960, it would be worth almost $400,000 today. That’s after an assassination of a president, several wars, a global pandemic, and multiple recessions, including the Great Recession. If the past is an indicator of the future, it is proven that markets eventually recover from downturns and that they have more periods of upswings than downswings.
Read more: Investing for beginners
Diversification is your best tool against market volatility and dips. Investors who are more cautious could try U.S. bonds, which are considered “safe harbor” investments because they are backed by the Treasury and offer a predictable return.
Right now, with inflation at 8.5%, Americans are flocking to Series I savings bonds, the government’s inflation-protected investment. Bonds also have a fixed rate and rate of inflation, which is adjusted every six months. Right now, I bonds will earn you an annual interest rate of 9.62%, which means they will give you higher guaranteed returns than any other federally backed bank account.
Technology makes investments cheaper and more accessible
Investing can be unnecessarily complicated and exclusionary, and the financial industry as a whole can do a lot more to remove barriers to entry. Guests on my So Money podcast, especially women, people of color, and young adults, have shared how they wish they had learned about investing sooner.
My advice? Lean on technology as well as social media and podcasts to gain access and education. At CNET, we’re big fans of robo-advisors like Wealthfront and Betterment, which provide low-cost portfolio management. There is no need to wait until you have $1 million in the bank, which some professional investment advisors require before working with clients. You can start with just a little cash.
And whether you’re a fan of TikTok, Instagram, or YouTube, there are several reputable experts who offer free education. One word of caution: Be sure to check their background and make sure whoever you follow isn’t a salesperson masquerading as an investment educator!
Once you invest, master automation so you never go astray. Automating our savings or retirement contributions is a smart move that frankly saves us from ourselves. With money in our hands, it’s much easier to spend it than to save it, but technology can do that. We’re more likely to save for our future if we’re already enrolled in a company retirement plan, rather than deciding to enroll with every paycheck. Start your contribution at the employer’s maximum rate and try to increase your contribution to 10% or even 15%. This can bring you thousands of extra dollars each year.
Pro-tip: If you’re saving for retirement, find out if your plan provider automatically increases your savings rate each year (60% of employers offer this feature, according to the American Benefits Council).
For all other types of long-term investments, such as a brokerage account orcreate a calendar reminder at the beginning of the year or on your birthday to increase your contributions.
You may also be able to set your portfolio to auto-rebalance to adjust and automatically pick up more stocks after a period of market decline, which can give you the right balance of stocks and bonds in your portfolio.
Auto-rebalancing is a feature many banks and brokerages offer to ensure your portfolio allocations don’t disappoint, says David Sekera, chief U.S. market strategist for MorningStar. For example, let’s say you set up your portfolio to contain an equal mix of stocks and bonds. A bear market like the one we’re in now can weigh stocks down and be too heavy on bonds. But automatic rebalancing can fix that by buying more shares when prices are low again, according to Sekera.
I’ve seen firsthand how market volatility creates a lot of uncertainty, and I know why it’s hard to be certain about investing. However, history shows that staying on the sidelines as an investor can be riskier than participating in the market and riding the highs and lows.
Getting into the market sooner rather than later can be one of the smartest decisions you make on your way to building personal wealth and financial security. In the process, keep your risk tolerance in mind, stay diversified, and rely on automation to help you stay on course.