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The Market Is Down — Is Now a Good Time to Invest?

Investing may help you build wealth and prepare for retirement, but should you still invest in a down market?

Justin Cupler

Contributing Writer at Tally

December 12, 2022

This information is provided for informational purposes only, and is not intended to be construed as tax, legal, or accounting advice. You should consult your own tax, legal and accounting advisors before making financial decisions.

Investing is crucial to building wealth and can play a significant role in a financially independent future. But in a market downturn, some potential investors grow wary of investing their money and wonder, “Is now a good time to invest?”

To help you decide, we'll provide you with a handful of questions you can ask yourself and point toward what experts say to help you make an educated decision about investing right now.

Is now a good time to invest your money?

Whether or not now is a good time to invest will depend on your personal situation and financial big picture. But here are some questions you can ask yourself to help you decide what's right for you.

Am I ready for an emergency?

Experts recommend having an emergency fund before you invest. You don’t know when you might experience a job loss, an income reduction, a major home repair or even a health emergency. If all your money is tied up in investments, you may not have the cash you need when you need it. 

The common suggestion is to have three to six months’ worth of expenses tucked away in an emergency fund. But some gurus, like Suze Orman, now recommend 12 months'expenses. Look at your situation and decide if you need to put more in your savings before you invest.

But even the money you save for emergencies can grow through interest while remaining accessible. You can place it in a high-yield savings account (HYSA) or a money market account. Both offer high annual percentage yields (APYs) relative to traditional bank accounts, and you can make up to six monthly withdrawals without a penalty.

Is my high-interest debt paid off?

High-interest debt, such as credit card debt, often has interest rates in the high teens. Investing to reach returns that high is quite rare. The average return on the stock market is about 10%

Let’s say you’re accruing 19% interest and choosing to invest the money instead of paying your credit card balance. Even if you’re making a 10% return on investment, you’re losing 9% because of the interest charges. 

Because of this opportunity cost, experts often recommend paying off your high-interest debt before investing. It can help you free up the extra cash flow you need to invest and eliminate the high-interest rates that offset some or all of your investment returns.

Do you need the money you plan to invest?

While investing can be exciting, there is always the risk of losing your entire investment. 

So, when asking, “Is now a good time to invest?” look at your budget. Is the cash you’re looking to invest needed for living expenses or debt? If so, this is money you likely cannot afford to lose, and experts recommend never investing cash you can’t afford to lose.

Are you financially patient?

Like many financial goals, investing is a marathon, not a sprint. So, you need to learn to be patient with investing. There will be upswings and market downturns, and it’s up to you to remain consistent and not make knee-jerk investment decisions based on market volatility.

If your investment performs well immediately or tumbles to a fraction of its original value, experts recommend you avoid selling the stock to stop your losses.

During an economic downturn and when inflation is high, experts say you can expect more market volatility, and some stocks may perform differently. For example, historically, in times of high inflation, value stocks have a track record of doing better than growth stocks. Watching market fluctuations or seeing your stocks underperform can make patience difficult. 

Can you invest a fixed amount regularly?

Some experts recommend investing a fixed dollar amount on a regular schedule — known as dollar-cost averaging. For example, you’d invest $100 monthly regardless of past performance and short-term market fluctuations.

This helps balance market volatility, as you will purchase more shares when the share prices are down and fewer when prices rise again. For a long-term investor, it will help level the stock prices over time.

Are there better options for you in the current market?

Knowing where to invest is just as important as asking, “Is now a good time to invest?” While periods of inflation may not be the best time to open an investment account and start investing in the stock market, there may be other growth opportunities.

For example, if inflation hits, causing the market to dip, and the Federal Reserve introduces an interest rate hike, the rates on various savings vessels tend to rise with it. 

Experts recommend using these times to make the most of your savings through HYSAs, money market accounts, certificates of deposit or Series I bonds. They all have variable interests that rise and fall as the Fed adjusts interest rates.

A financial advisor can help you assess whether one of these savings options is better for your situation than investing in the current climate.


Have you spoken with a financial advisor or investment professional?

The final key to knowing if now is a good time to invest is speaking with a financial advisor or investment professional. These professionals are trained to read Wall Street and understand the various trends, such as bear markets and bull markets. They can then give you sound advice on where to invest your money for the best returns.

A professional can advise you on the right diversification for your portfolio. They are skilled at determining how to balance your money between individual stocks, bonds, mutual funds, exchange-traded funds (ETFs), Nasdaq or S&P 500 index funds, savings accounts and more.

They can ensure you have a broad asset allocation so if one or several investments struggle or crash completely, you still have equity in other investments.

However, remember that even the best advice and financial planning cannot overcome bad market conditions. So, in some cases, you may still lose money regardless, but it’s your advisor’s role to minimize your losses.

Look at your situation to decide whether to invest

When the market turns downward, it’s natural to question whether you should be investing. Take a look at your personal finance situation to decide. 

For example, you’ll want to consider the following:

  • The state of your emergency savings

  • How much debt you have 

  • Whether you can spare to lose without causing financial harm 

You can also speak with a financial advisor to help guide your investment strategy based on your goals, needs and risk tolerance.

If high-interest debt prevents you from investing, the Tally† credit card debt repayment app can help. Our app helps you manage your credit card payments, and Tally offers a lower-interest personal line of credit, allowing you to pay off higher-interest credit cards efficiently. 

To get the benefits of a Tally line of credit, you must qualify for and accept a Tally line of credit. The APR (which is the same as your interest rate) will be between 7.90% and 29.99% per year and will be based on your credit history. The APR will vary with the market based on the Prime Rate. Annual fees range from $0 to $300.