When the investors invest in the stock market for the first time. They often worry about the timing of their initial stock purchases. This is because when you start trading or investing in the market at the wrong point. Then the market’s ups and downs can take you to suffer big losses. Whenever you first invest, time is on your side. You will notice that over the long haul, the compounding returns of a well-chosen investment will add up nicely. No matter what the market happens to be doing when you buy your first shares.
It is suggested to all the novice traders. That rather than fretting about when you should make that first stock purchase. You must think about how long you are planning to keep money in the market. Various investments offer varying degrees of risk and return. And each is best suited for a different investing time frame.
Generally, you will notice that the bonds offer smaller, more dependable returns for investors with shorter time frames. Longer-term government bonds provide slightly higher returns. Stocks have also been very good to investors. All the large-cap stocks have returned an average of 10.4% per year from 1926 to 2003 which is quite a bit higher than bonds.
Interestingly, the range of the returns for stocks is not that much larger than the range of bonds over the same period. Since you have more time to wait out periods of bad returns, the greater risk you can accept.
In case, you want the money within the next five years, you need to avoid individual stocks and stock-centric mutual funds. In case, you want your money in the next three years, then you can avoid investing in a bond, mutual funds and real estate as it can drop if interest rates increase.