When is the right time to invest? The answer is steadily and frequently.

Everybody wants the best investment returns that he can get. So how do you time the market to ensure top-notch results?

Learn from the masters

Master investors through the ages have always told us that market timing is irrelevant:

Benjamin Graham: "In the short run, the market is a voting machine. In the long run, the market is a weighing machine."

John Templeton: "When is the best time to invest? Whenever you have the money."

Anonymous genius: "It's not timing the market; it's time in the market."

You may be thinking that, while the above advice sounds great in theory, great timing would beat the pants off the average investor. And why should you settle for less?

Proof, meet pudding

There's probably something to the words of wisdom from the past. In its first century, the Dow Jones Industrial Average multiplied 120-fold. That includes a seven-year span when the Dow lost at least 25 percent of its value. If the markets pull another century like that, starting from today's value of about 12,000 index points, the DJIA of 2108 might stand at an index value of 1.44 million.

Or, look at the performance of the Standard & Poor's 500 index between 1987 and 2007, a period that includes the infamous Black Monday in October 1987, the bursting of the tech bubble in the early 2000s, and the beginnings of the recent housing bust. If you had used a strategy of dollar-cost averaging throughout that time, your return would've been two times higher than if you had invested in "safe" government bonds. More surprisingly-to market-timing hopefuls, at least-that return would lag a perfectly timed annual investment by only 7 percent. No, not 7 percent per annum, but 7 percent over the entire two-decade span.

Even if you picked the absolute worst time to invest every month, when the S&P stood at its monthly peak, you would have fallen only 13 percent behind Mr. Perfect Investor, and nearly double the bond investing stock market skeptic. In other words, dollar-cost averaging-or even terrible timing-easily beats staying on the sidelines in the long run. And therein lies the answer to the question about when is the right time to invest: Just get in the market whenever you have the money.

Get going, and stay on target

Unfortunately, few investors actually live by this credo. Market enthusiasm when prices are high makes people want to buy in-even at terrible prices. This is okay if you hold those positions for a long time. But so many people turn around and sell when times are bad, making tiny profits at best, big losses at worst.

It may be hard to buy whenever you have cash, and hold on to that investment until you really need the money, which, hopefully, will be never. That's how a rational investor should behave, and there's a lot of money to be made with that strategy.

Published on June 2, 2008