The stock market has been on a roller coaster lately. One day the DOW is up over 200 points, the next day down the same amount or more. This near-term volatility invariably brings out the question, “Is now a good time to invest?”Or, alternatively, “Is Company X a good stock to buy?”

In order to properly answer these questions you need to assess certain key factors. Let me first draw an analogy: If you are about to start a marathon, you should not sprint. Rather, you should pace yourself accordingly if your goal is to make it to the finish line 26-plus miles later. If, however, your house is on fire, you should forget the warm ups and race outside as fast as possible! The point being, the pace must match the distance. The same applies for investing, but rather than distance being a key consideration, it is time. Here are the important questions you must ask in constructing your investment program:

Question 1: What is My Time Frame?

In the world of investing, the most important variable to consider is when you need the money back. Investing is just a means to some other end – retirement, the purchase of a house, college education, a fancy vacation next year. If you need the money in the next few months or even couple years, then you should have money invested accordingly – in near-term instruments like cash, CDs, money markets or perhaps short-term bonds. No matter how good a given stock is, or no matter how strong the market at large is roaring, you need to have the discipline of matching your investments with your time horizon.

Intel could be a great investment for someone with a three-year or more time horizon, but a terrible investment for someone who needs the cash in the next couple weeks. Simply put, the only way to properly answer the question as to whether it is a good time to invest starts with your time horizon.

In managing money for my four-month-old daughter’s college education I am little concerned with where the market will be in the coming weeks, months or even few years. In managing money for my seventy-six year old mom, I look very closely at valuations and asset classes (stock versus cash, for example) since her investments have a different time horizon. Cash for my mom is safe and prudent, whereas cash for my four-month-old is actually risky. Why? Because cash over time loses money when factoring in taxes and inflation, thus the risk being taken is that she will not earn enough in the next 16 years (yes, she will be going to college early) to have sufficient funds to pay for university. Match your assets with your time horizon and you will avoid a key mistake many investors make.

Questions 2: How Much Am I Paying for The Stock?

Think of four quadrants with “Good Company/Bad Company” on the top of the square, and “Good Stock/Bad Stock” on the left side of the square. Your goal as an investor is to be in the “Good Company/Good Stock” quadrant. Let me explain. Coca-Cola has been a good company for decades. But it has not always been a good stock. In the late 1990s andearly 2000s it was a “Good Company/Bad Stock” since the price you had to pay for it was excessive, at over 40 times earnings. Indeed, nearly 10 years later the company is earning about three times more than it did a decade ago, but its stock price is down. Now Coca-Cola is a “Good Company/Good Stock.” The price you pay for any asset is a key variable for future returns, and the shorter your holding time horizon the lower the price you need to pay to ensure a positive return on your investment.

Question 3: Does The Investment Meet My Objectives?

Even if you properly identify your time horizon and find a good company/good stock, you need to be certain that the investment meets your objectives. Imagine a personal trainer putting you on a workout regimen without even knowing your goals. After months of hard work he says to you proudly, “Well, Steve, we did it – you lost those 20 pounds of extra weight!” “But”, you reply, “I was training to become a Sumo Wrestler!” The workout plan didn’t connect with the goals.

Back to the world of investing. Some people are looking for growth – others for income. Some investors can withstand (emotionally and financially) near-term volatility while others need or simply prefer a smoother ride. Various securities, by their nature, ‘behave’ differently. When markets drop, certain stocks tend to fall even more than the market (think small company growth stocks) while others typically hold steady (think utilities). Be certain that your investments match your objectives. If you are looking to generate income, seek out strong dividend paying stocks or high yielding bonds. If you are after long-term growth, small companies that reinvest their profits rather than paying them out in the form of dividends could be right for you.

Selling some Microsoft may be prudent for Bill Gates given his time frame, objective and overall portfolio (high concentration in the stock), whereas for another investor buying Microsoft may be a smart move. The danger behind TV shows where the commentators scream “BUY” or “SELL” is that they do not factor in your particular circumstances. Your house may be on fire and the person recommending that you take your sweet time to warm up is unaware of your particulars. Make sure you (or your investment professional) is asking the right questions: not doing so can have a big impact on your near and long-term financial future.