3 Reasons Not to Invest Now

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A common piece of investing advice (which is generally true) is that the best time to start investing is now.

But we must also remember that investing requires a personalized plan. You must invest based on your particular season in life and your particular financial situation. Too often people invest on what others say or think. They say, “This is a great time to be buying stocks.” They say, “The market is down, so you should start investing.” Friends say, “I know stock XYZ is going to skyrocket.” Financial advisors say, “You’ll be a millionaire in five years.”

Before any of us are ready to invest, we must first look in the mirror and look at our own financial books. For example, when addressing the question "Should I pay off my mortgage or invest?", people should consider their own personal situations and give that priority over everything else. This is because the mirror, not the Dow Jones, is often a better indicator of the right choice. Investing “now” just because that is commonly true might be a mistake in your case.

You Lack Basic Investing Knowledge

While investing has many enemies, none is more formidable than the enemy within. In the book Have Kids? Here are Four Financial Mistakes to Avoid, Steve Saclicci says:

Remember that old saying about the wisdom of "learning from your mistakes"? It’s good advice. But it’s wiser to learn from someone else’s mistakes.

While there are many lessons to be learned from investing, you should not start investing until you have at least fundamental investing knowledge. If you are thinking about mutual funds, then learn mutual fund investing basics. It may not be necessary to delay investing indefinitely, but spending a month learning, researching, and reading can go a long way to getting you started on the right track. Once you know how to start investing, you will be able to make wise investing choices.

You Have Debt

It is great if you have decided that you want to get your financial life under control. Getting out of debt is a great thing. Unfortunately, if you have debt, a better choice for you is to postpone saving for retirement until you are debt free. While there are certainly exceptions to this rule, most people who have debt would be better off emotionally and mathematically if they first reduced their high consumer debts. One of the biggest mistakes you could make is to start investing, have high interest payments, and then later need to withdraw money (at a fee) from your retirement account to get you out of a financial bind.

Your Future Plans Are Completely Unknown

None of us can know all of our future plans with certainty. However, when investing, you need to have a solid idea of how you want to invest the money and how long the money can stay in the market. Time is a necessary component for reducing risk. The more time you have, the less risk you assume. If you have money and have no idea how soon you will need it, you are better served keeping it in a high interest earning bank account.

Oftentimes, buying, selling, and transferring accounts incur fees. Don’t get in a rush and open an account only to find out that you will need to pay fees to withdraw funds early from a retirement account. In addition, you need to take the time necessary to be sure the investment type is right for your needs. For example, if you start saving for your kid’s college using an ESA, you cannot later transfer those funds to save with a Roth IRA instead. You need to be sure about your game plan before you jump into an investing strategy.

Investing is a highly personal activity based completely on your individual situation.

Can you think of any other situations where “now” might not be the best time to start investing?