Should I Even Invest in The Market Right Now?

   

Can there be such a thing as a good problem? Isn’t that an oxymoron? I guess it is. If I was heavily invested in the stock market, but still have some excess cash to invest, I may be the victim of a good problem. Unfortunately I am NOT, but am looking forward to this problem later in life. I’ve heard that the market operates in a seven-year cycle. So I decided to see for myself. The stock market or S&P 500 index was rising in the early 90s (reason being the dot com era), then falling, then again in the late 2000s (reason being housing bubble), then falling – Great Recession, and then rising again around 2010 and continuing too. (see S&P chart below from about a week or so ago).

 

 

 

 

 

 

 

 

 

From 1989 to 1999, the rise was 10 years long. From 2003-2007, the rise was 5 years long. And from 2010 to 2017, the rise has been for 8 years so far. So it’s not really 7 years at a time, but the average from my calculation is 7.6 (10 years + 5 years + 8 years = 23 years/3 cycles = 7.6 years). If and when it drops, which I’m thinking could be soon, I may be in a better position to buy (even though buying in a market downfall is a very hard thing to do). Anyway, let’s continue to focus on what’s right now – back to reality.

 

Market Seems High

For the past 3 months, the Dow has been in the 19,000 to mid-20,000 point range – an all-time high. But what if it continues to get higher and an opportunity to get in was lost: Investopedia believes this is possible as it states “while stocks may be expensive now, they might become more expensive later. These securities could even be in a secular bull market, which is an extended period characterized by upward price movementsInvestopedia’s case for buying. Also remember that the future value of money is less than what is today. For example, at a 3% inflation rate $100 today may be worth around $75 in 10 years due to inflation and thus decreased purchasing power. Check out this chart (click to expand) from ObservationsAndNotes:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Am I Better Off Holding Cash?

Not a whole lot probably enough to fund an emergency account and a bit more to fund an opportunity you may have waited for. The logic for hoarding cash depends on your age too. If your younger (40 or below), it’s better to buy stock because you have time on your side and if the market is high, it can continue to go high and you’ll profit. However if it falls, you still have time to recover and cut your losses or hold on and be patient in the hopes that, based on past history, the market will bounce back once again.

 

If your more experienced in life (note I didn’t say older :-), then still don’t hold cash, rather invest in a bond fund. You’re invested and still have the flexibility to sell and but into something else when a great opportunity arises. A lot of financial publications say that time in the market is more important and gives you a much greater shot at achieving financial independence than timing in the market. So if you’re young or old, when is the best time to get into the market…..how will you know? Oh you’ll know. Just kidding, you won’t really know and no one does. I don’t believe in timing the market. I believe in consistency, establishing prudent financial habits, setting a reasonable budget which includes an investment line item.

 

Don’t Stop Dollar Cost Averaging Though

Of course if you’re in your organizations retirement plan, you should definitely continue to invest in it. Overall you may be investing at a bit of a high time, but what if you decide to forego it and take the extra money in your paycheck. Without going into the details of this, there are drawbacks. One: you’ll lose out on the tax deferred benefit of investing now in your retirement plan and not having to pay tax till years later when you retire. Two: if you get a company match, which many do, you’ll lose out on FREE money! Three: you’ll run the risk or incur the temptation of having the extra money in your paycheck (which will be less by the way because you’re going to get the after-tax amount) and may not be disciplined enough to save it – “hey I got a few hundred bucks to spend now, how about another big screen TV in a different room”. If you were invested in the retirement plan and contributing regularly without any financial problems, chances are you don’t have an immediate need for the money anyway.

 

So are you buying, selling, or holding on and riding the wave right now? Please share below.


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13 Comments

  1. I just bought another house and am going to look to rent out my current house.

    I’m getting the 4% company match through my 401k, and that’s about it. I’m going to max out my IRA, but again, am not too excited to go nuts in the market place.

    This summer will be learning how to paint, do trim, re-do floors, etc. Will be exciting!

    • Wow! You are really staying busy. At least you are getting match/free money. I’ve worked at a firm where there was no match offered at all, but at that time I didn’t know the true value of this benefit. I guess ignorance was bliss for me 🙂

  2. We are holding right now and adding to certain positions on dips. We are long term investors so we don’t mind the ups and downs in the short -term. Before purchasing any investment we do research so we are comfortable with the companies we hold. While most of the market is up YTD there are always opportunities to add or start new positions in!

    • There’s always those few stocks or funds that are good, but the price is not really reflected. Once you do research it’s more comforting buying them. But at least part of me is still a little weary. I suppose that’s with all investments. I do have to begin reallocating now to my original investment plan.

  3. I definitely have continued investing even with the market rising. Although I secretly wish it would go down so that I could buyer cheaper shares 🙂

    I have a friend that has remained in cash since 2011, waiting for the market to crash. He’s still waiting unfortunately…

    • Haha, I’m secretly wishing the same thing….maybe a correction I suppose to get more bang for my buck! I’m sorry about your friend, he truly has missed out. I used to think timing the market could be beneficial, if that’d work, I would play the lottery too.

    • Oh geez, since 2011?! That’s a long wait. But I only can say that now since hindsight is always 20/20.

  4. I’m not looking to invest in stocks. I have a strategy and my portfolio has fixed % for each asset. Only if that change, will I invest (or sell).

  5. I would say YES. Warren Buffett would say YES. Even the POPE would say YES….ok bad example LOL. Think long term!

    • Yes, long-term per history stocks will go up. If we have 10+ years until retirement or time to invest before making withdrawals, one can say it’s a good time to invest. Of course it’s about time in the market instead of timing the market.

  6. Ugh when I saw this post I jumped on it so quick. My husband and I have stockpiled close to 70K and growing since mid 2016…I’m getting itchy but everything seems so inflated 😉

    • True, since I’m in this investment game for the long-term, I figure I’m dollar cost averaging. Even though the average it seems is up these days (sigh). The expectation/hope is in 20+ years it will be a lot higher!

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