How Do I Know When To Start Investing?

published on 22 March 2022

Over the past week, we have received a lot of positive feedback on our most recent newsletter:

Why The Stock Market Always Goes Up, which you can read HERE.

Therefore, I wanted to follow up on a question I received from several people off the back of it.

“When is the best time to invest my money?”

If you read between the lines, what most people are really asking is...

“How do I time investing in the stock market, so that I can buy low, watch my investment grow, and avoid buying right before a market dip?”

The simple answer is that you can’t.

Nobody can!

There are people on TV, in the newspaper, and on Twitter who make a living trying to predict what will happen in the stock market. They are called stock forecasters.

Some will say we are heading for a stock market crash, you need to be cautious. Others will contradict this and say that we are at the start of an economic boom so get on board.

The problem is that there are so many opinions, someone is bound to be “right”.

The truth is that they are just that, people’s opinions. These views are not based on fact.

One of my favourite Warren Buffett quotes is about the inaccuracy of these stock market forecasters:

"We've long felt that the only value of stock forecasters is to make fortune-tellers look good."

So if nobody can accurately predict what’s going to happen in the stock market, when is the best time to invest your money?

The answer is consistently.

What the hell is “Dollar Cost Averaging?”

There is a strategy in investing called Dollar Cost Averaging (DCA), that is designed to help you avoid trying to time what is happening in the stock market.

Dollar Cost Averaging is a fancy way of saying, invest in the stock market on a regular basis.

Instead of trying to time when things are good or bad (which we know is not possible), you invest consistently in the stock market regardless of what is happening.

When the market is hot and going up, you invest. When the market is flat, neither up nor down, you invest. And when the market crashes, most importantly, you invest.

DCA’ing can be a powerful tool in your investing toolkit by tipping stock market conditions in your favour and helping you recover quickly when the stock market is declining.

For the purposes of this newsletter I am talking about investing in the stock market as a whole (i.e. index funds) not just in one company’s stock. The reason is that we know from last week that the stock market always recovers and goes up over time, despite many short term setbacks.

The same cannot be said about individual companies...

Dollar Cost Averaging vs Lump Sum Investing

In my opinion, the best way to illustrate the power of DCA’ing in through imagery.

Below are examples of two teams who invest in the same thing, for the same length of time, and the investment performs the same way, but the results are quite different based on their initial strategy.


Team blue takes the “lump sum” approach to their investments. They put £8,000 into the market in January and invested a total of 8 months at £10 a share. They don’t make any additional investments.

As you can see, the price of their investment ping pongs up and down. After 8 months, their investment lands right back where it started at £10 a share.

Teams blue’s return on their investment over 8 months is 0%.

Team grey takes the “dollar cost averaging” approach instead. They also start investing in January for 8 months in the exact same thing as team blue. However, there is one major difference. Team grey doesn’t invest £8,000 as a one off lump sum. Instead, they Dollar Cost Average by investing £1,000 per month over 8 months.

Again the price of the investment ping pongs up and down over the 8 month period and lands right back at where it started at £10 a share.

But team grey’s return on their investment over the same 8 month period is 4%.

How did that happen?

Team grey used the price fluctuations to their advantage. When the market went up at the beginning of January, their investment went up. Great!

In March, May, June & July when the market “dipped” below £10 a share, team grey had the opportunity to buy more investments at a discount next month, knowing that over the long term the market will always recover and go up!

And when the market did recover and go up, team grey made a profit.

Team blue didn’t have this same opportunity, as they invested their full £8,000 at the beginning, and didn’t invest anything else over the next 8 months.

Essentially, team grey tipped the market conditions in their favour, regardless if the conditions were good or bad.

If their investment went up, great, they made money!

If their investment were flat, great, they didn’t lose money!

And if their investment went down, ALSO great, as they had the chance to buy their investment at a discount the next month. When the market recovered, they made money.

People always ask how often they should DCA? Every week, month, or year?

It doesn’t really matter as long as you are consistent. The most typical response is to Dollar Cost Average each month, which coincides with your paycheque, however it’s really up to you as long as it’s regular (monthly, quarterly, yearly).

When your favourite clothing store has a 50% sale, you are ecstatic because you can buy your clothes for a cheaper price.

People usually react the opposite with investing, and see these “sale” opportunities as catastrophic, when in fact, to the knowledgeable investor, they are an opportunity.

Don’t get me wrong, it sucks seeing your investments go down. It’s not nice to lose money in the stock market. However, you can train yourself to view this as a positive vs. a negative because these dips allow us to “buy low” knowing that it’s only a matter of time before your investment recovers.

Dollar Cost Averaging can make you a resilient investor, even in the toughest of market conditions.

Defend Against The Big Scary Event

On the horizon, there is going to be a big, scary event that will rock the stock market. I have no idea what it is, or when it’s going to happen, but eventually, it will.

I am conscious enough to understand that these events can sometimes have a big impact on your finances and your job security. Investing during these periods of turmoil might not be possible for you. That I do understand.

However, if you are lucky enough to continue to invest, even in stock market crashes, you give yourself an advantage to recover your losses even quicker.

With investing, history is one of our best teachers.

The Great Depression in 1929 was the worst economic meltdown in history. From 1929-1932, your investments in the market would have been down a whopping 89% from peak to trough, a terrifying thought for any experienced investor.

It took the stock market until 1954 to get back to the same level it was pre depression. WOW!

Let’s see what role DCA could have played in your recovery.

According to a study by the Wall Street Journal, if you had continued to invest regularly into the stock market (The Dow Jones Index in the case of this study) during this gut-wrenching event, you would have recovered your investments by 1933 vs 1954.

If you continued to invest consistently, you would have doubled your money by 1936!

If someone started investing $100 a month in September 1929 (literally the worst possible start to your investing career) and continued every month investing into The Dow Jones for 30 years, they would have ended up with over $400,000.

The same story can be told of 2008, during the global financial crisis.

When the housing market collapsed, the stock market fell by nearly 50%, and it took 5 years to recover to pre crash levels.

However, if you had continued to invest during that downturn into the S&P500, then you would have recovered your money closer to 1.5 years later and also rode the next decade of phenomenal growth.

Dollar costs averaging can be a great strategy, especially if you are not that interested in constantly keeping up with short term financial markets.

Investing monthly, regardless of what is happening in the stock market, allows you to become immune to the constant noise around you, and in turn, less stressed about short term-market fluctuations.


Dollar Cost Averaging is a powerful way to avoid trying to time the market, take advantage of price fluctuations, and help you recover faster from market crashes.

It can also be an incredible way to build wealth.

So, why don’t more people do it?

One of my theories is that this type of investing is boring!

It’s why you see investment companies like Robinhood or e-Toro take advantage of gamification. They have turned investing into an addictive game you play on your mobile phone.

Or the world of Crypto and NFT’s. There’s a rush!

Everyone out there is trying to get rich quickly. Boom or bust mentality.

There is nothing that exciting about setting up a direct debit, into the same index fund, and doing nothing for 35 years.

Below is our new TOMII Investment Calculator showing you how £500 invested consistently each month over a long period of time can make the average person a millionaire in their lifetime, even if you start at £0.

Whether that’s through your pension, your Stocks & Shares ISA, or a combination of the two. If you have a partner, it makes this even more possible!

investment calc-4a07y

A total of only £210,000 of your cash was invested over 35 years and over £900,000 made in interest.

It’s not very sexy, but there is something exciting about building generational wealth for my family.

To me, this is the simple path to building wealth.

❤️ Patrick & TOMII Tribe

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Playing with FIRE is a documentary on financial independence. Not to be confused with the John Cena family friendly movie of the same name! This story follows a couple on their pursuit of financial independence and downsizing a life they could not afford in the USA. It’s gripping, heart warming and also inspiring for those on the path (and not on the path) to financial independence.

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