Market Timing– The allure of market timing is certainly understandable. Long bull markets make investors skittish. Quick market downturns happen almost every year and scare everyone equally. However, the notion that you can exit the market just before it takes a dip, and then jump back into the market just before it rebounds, is terribly attractive but nearly impossible to do. Reinvesting your money at the moment the market begins to rise from the ashes is a real challenge. Stock prices surge quickly after a drop. When the noise of gloom and doom seem the loudest and fear permeates both Wall Street and Main Street that is when a market rebound most often occurs.
Recognizing that you’ll never be able to predict the near-term performance of the investment markets is liberating. Once free of this notion, you can confidently devise a diversified investment strategy and stick with it, even when you’ve lost money and the Wall Street pundits are trumpeting their awful forecasts from the roof tops.
Amidst the incessant noise and commentary, remember these keys to long-term investment success over multiple market cycles:
- Harness the power of dollar cost averaging.
- Periodically rebalance your portfolio.
- Resist the temptation to make sudden shifts in your investment strategy.
- Lastly, stay the course.
If you practice the above, even when you have lost money, you will reap rewards over the long term and agree that happiness is a dull portfolio.
Smart Money Tips
- Make the most of your company match. While 69% of private industry workers had access to an employer-provided retirement plan in 2022, only 52% chose to contribute to their plans. Of this amount, about 14% of workers contributed the maximum to their workplace retirement plans. Perhaps that’s not surprising because the maximum allowable contribution is quite high. Less excusable, are those participants who don’t contribute enough to their plans to trigger their employer’s matching contribution. Since workplace retirement plans are the primary savings vehicles for most workers, do your utmost to contribute enough to take full advantage of the employer match. After all, this is free money. Any contribution increase you can muster for the rest of the year will help capture more of your employer’s match and reduce your income taxes to boot.
- Beware of scams on the airwaves. Most ads for debt relief, credit counseling, gold coins, getting out from back taxes, high interest securities, buying real estate on the cheap, to name but a few subjects, are from organizations that are not going to help you. Simply enter the name of the company in a browser plus “scam” or “rip off”. The results are horrifying. They may say they’ll help you, however, more often than not they’ll help themselves to your money at a time when you don’t have money to waste. There is no replacement for taking control of your monies, having a solid financial plan, and (as stated above) staying the course.
Food for Thought
The four horsemen of the Investment Apocalypse are fear, greed, hope, and ignorance. And notice, only one of the four is not an emotion – ignorance. These four things have accounted for more losses in the market than any recession or depression, and they will never change. Even If you correct ignorance, the other three will get you every time.
-James P. O’Shaughnessy
Money Can Be Funny
I’ve got all the money I’ll ever need if I die by four o’clock.
-Henny Youngman
Word of the Week
jumentous (joo-MEN-tuhs) – Smelling like horse urine.
Origin: From the Latin jumentum meaning “yoked beast,” which in tum comes from jungere, “to join” orjugum, “yoke.” In French, a mare is called ajument.
The acidic jumentous stench from the stables was a stark contrast to the perfumed beautiful people in the stands at Churchill Downs on Derby Day.