Posted by Mike Smith :: December 18, 2008 @ 11:27 am

There are many times when it’s advantageous to invest, but here are four common ones. Depending on which you encounter, and your situation, the best type of investment could be found in the stock market, purchasing notes on Lending Club, buying a stake in a business, or even a more exotic option.

1. When others are afraid or unable to invest

Among the many famous quotes of Warren Buffett is the gem to “be greedy when others are fearful and fearful when others are greedy.” Though investment fear is lower than it had been a few weeks back, significant fear still remains. Now may be the time when the seeds that grow into the riches of tomorrow are sown. The time when you (and others around you) seem least able to invest may be exactly the time to do so.

2. Before a planned reduction in income or increase in expenses

Investing as much as possible when you are able to may help to offset those times when you are not. A good example of both cases is if you are expecting a child and plan to quit your job to provide care when the child arrives. The child will certainly raise expenses and quitting your job will obviously reduce your income. Investing as much as possible before those events occur is likely much better than hoping to be able to make small investments after they occur.

3. When a recurring expense ends

If you have a recurring expense, such as a car payment, investing that amount once the car is paid off should be easy. You will have grown accustomed to living without that money each month, so your standard of living will remain the same. With no change on your part, you’ll transition the allocation of that money from a depreciating asset to one that has the potential to appreciate significantly.

4. When investing offers the highest relative return

Though higher returns invariably carry higher risk, there are times when the risk/reward relationship tilts in your favor. In other words, sometimes twice the return can be achieved without doubling the risk. When surveying all of the potential ways to use your money, opportunities may present themselves that make the decision to invest an easy one.

How many of these apply to your own situation? What other advantageous times have you found to invest?