The market has been everything except for sane the past couple of weeks. Almost to the point of me being insane. Just kidding…..but not really.
Despite the recent downturn, I still have clients that see the recent pullback as opportunity. The only issue is that they are not sure when to get in.
I filmed the below video earlier in the year, but the main points still apply today.
Do you know the right time to invest into the market?
Transcription is below…..
Are you an investor that is currently sitting on the sidelines wondering when is the right time to get into the market? Have you been sitting in cash for longer than you need to and just want to know where is the best place to put your money right now. Let's see if the following story can help you make a decision on what to do as far as when is the right time to invest.
I had a gentleman call me up the other day that had come across my blog, and he was impressed with my site. That made me feel pretty good that he was impressed. 🙂 He was sitting in cash, had several hundred thousand dollars sitting in his money market, and he's been waiting for the right time to get in and wondering, “Where do I put my money right now?” He wanted to get in last fall and was waiting for the market to have that 10% pullback that he knew what going to happen. Unfortunately, that didn't happen, and now the Dow Jones is up 30 some percent to where it was when he wanted to get in. Now he is wrestling with the fact,
“Do I get in now? Is it too late? Is it the peak of the market?”
and was just very unsettled on moving forward with that next step.
I know that he is not the only one sitting there wondering,
“Is it time to get in? Should I have gotten in? Did I miss out? Is this the peak? Are we going to have repeat occurrence with what happen in 2008?”
There are a lot of emotions, a lot of mind games that you are playing with yourself trying to figure out what is the right thing to do. With my experience you cannot play these mind games with the market trying to figure out when is the right time to get in. If you come to the point and decide you know you need to get in, then you need to do so, but let's see if this plan of attack will help.
What's Your #?
The first thing that you have to do, first and foremost is identify what your number is. If you remember my previous video where I talked about that, you need to determine what percentage of stocks and bonds you need to be in based on what your income needs are. That is a priority. It doesn't matter whether you need to get in or not. What matter is what percentage of stocks and bonds do you need based on what your retirement goals are, so first you figure out what that number is. As I was telling him, figure out that number.
More from GFC, Below
Let's say for example that based on your income need you figure you need to be 50% in stocks and 50% in bonds. You've sat down with a financial planner and you've determined that is where you need to be, but you're still skittish because of the Dow Jones and where it's at where you think you're at a peak. Here's one suggestion. This is just one method that you can do, but I think it makes a lot of sense for a lot of people in a lot of different situations.
Make a Determination
So you've determined half market, half bonds you want to be in. Take half of the money you are going to invest and invest in that strategy. If you're going to be half stocks half bonds, you take 50% of your remaining cash and you invest it that way. Now you've got half of the cash invested into half stocks half bonds, so really you're only about 25% into the market.
Then the rest of it you just do a simple dollar-cost average to where you start putting in little trickles of money, little chunks of money over the next six or 12 months, maybe longer. Who knows? I know right now I am leaning more towards the six-month mark, but there have been times in the past where I have been 12 months, sometimes 18 months depending on the situation, depending on the client need, and also depending on what's going on in the market. I think that is a very smart strategy that can let you get in in a very conservative rate. It protects you in the upside with also some protection on the downside just for the simple fact that you're not putting all your money in at one time.
Obviously, it's not a bullet proof vest. It will not prevent you from losing money in the event that we have a repeat occurrence of 2008, but it should help prevent having major catastrophic losses in the event that we have a major pullback.
I think that is just one strategy that makes a lot of sense for a lot of people. Obviously, you need to sit down with a financial planner and just make sure that makes sense for you. Hopefully that will enlighten you if you have been sitting on the sidelines and wondering when to get in and where is the best place to put your money right now. First identify your number, then potentially move half in and the other half trickle in over a 6-12 month period. If you have any more questions, you know where to find me. We'll see you next time. Take care!
The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing.