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Put a portion in cash. At some point the market will have another downturn. The 1987 stock market crash occurred 7 years after the 1980's recession. The mini-be

by meric 13y ago

Put a portion in cash. At some point the market will have another downturn. The 1987 stock market crash occurred 7 years after the 1980's recession. The mini-bear market in 1994 happened 7 years after the 1987 stock market crash. The dotcom bust occurred 7 years after the 1994 mini-bear market. The GFC occurred 7 years after the dotcom bust and it is currently the 6th year since the GFC. https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&chvs=maximized&chdeh=0&chfdeh=0&chdet=1396270301650&chddm=486013&chls=IntervalBasedLine&q=INDEXSP:.INX&&ei=2mQ5U8j5I9ChkgWuUQ https://www.google.com/finance?chdnp=1&chdd=1&chds=1&chdv=1&... Does it look like a good time to put all your money into a S&P500 index fund?

bluedevil2k 13y ago
That's the problem, you can never tell when it's a good time to invest or a bad time. You think people thought it was a good time to invest in March 2009, when the Dow was at 6500? Many people pulled all their money out, thinking the drop would continue. Those who bought were happy. There's an equally likely chance the market will go up 10% in the next year as down 10%. And, there's definitely no pattern to the market.
- meric 13y ago
  I suppose you're more of a theory type than I am. For the record, I invested every dollar I had but $100 into the market between March and May 2009, though it was not much (several thousand) as I was but a humble student. I also bought TSLA at $28 and SCTY at $12, and I still hold both of them.
conroe64 13y ago
The 1994 mini-bear market? You're shoehorning the data a little to match your theory, don't you think?
- meric 13y ago
  Actually, no. The S&P 500 was 20% higher in Jan 1994 than in Jun 1994. I'm not saying it has to be around 7 years, I'm just saying it's generally not a good idea to start investing all your money into the stock market when it's at or near all time highs. There's even an urban dictionary word for it. "BTFATH" - Buy the fucking all time high. http://www.urbandictionary.com/define.php?term=BTFATH http://www.urbandictionary.com/define.php?term=BTFATH
  - inyourtenement 13y ago
    Don't time the market. Timing the market gives you two chances to screw up -- when you decide not to invest, and then when you decide the time is right. Or to put it more concretely, there is a long chain of "all-time highs" before the last all-time high. You would miss out on all that investment time if you avoided the market based on all-time highs. And then a correction comes -- but is it the one you were expecting or is there a bigger correction in the wings? In the end, one never knows. None of the rules of thumb are reliable. And you can shoot yourself in the foot far more by trying to time, than by just buying and holding.
    - meric 13y ago
      You're timing the market if, for whatever reason, you haven't invested in the past 5 years, and now that the market is at all time highs, decide to allocate 100% of your assets into the market. I hold my suggestion to the OP, keep a portion in cash.
      - inyourtenement 13y ago
        That's not really true, and not what people mean by "timing the market." Thinking the market generally goes up and one should invest in it is not timing, no matter when you think it. Repeating the phrase "all time high" as though it indicated the future is precisely timing. It's been shown that if you have a lump sum of money, it's most often better to dump it all in the market as soon as possible, rather than gradually buying in. Of course you shouldn't put 100% of your money in the stock market, your advice was reasonable.
        meric 13y ago
        I still think, unless you're investing a constant amount of money every X period, you're timing the market, since you're still subconsciously or consciously picking when to invest into the market depending on time. The pitfall with "Thinking the market generally goes up and one should invest in it is not timing" is, the thought only occurs after the market has gone way up, rather than occurring unbiasedly between instances when the market has gone way down or way up.

by meric 13y ago

bluedevil2k 13y ago

That's the problem, you can never tell when it's a good time to invest or a bad time. You think people thought it was a good time to invest in March 2009, when the Dow was at 6500? Many people pulled all their money out, thinking the drop would continue. Those who bought were happy. There's an equally likely chance the market will go up 10% in the next year as down 10%. And, there's definitely no pattern to the market.

meric 13y ago
I suppose you're more of a theory type than I am. For the record, I invested every dollar I had but $100 into the market between March and May 2009, though it was not much (several thousand) as I was but a humble student. I also bought TSLA at $28 and SCTY at $12, and I still hold both of them.

conroe64 13y ago

The 1994 mini-bear market? You're shoehorning the data a little to match your theory, don't you think?

meric 13y ago
Actually, no. The S&P 500 was 20% higher in Jan 1994 than in Jun 1994. I'm not saying it has to be around 7 years, I'm just saying it's generally not a good idea to start investing all your money into the stock market when it's at or near all time highs. There's even an urban dictionary word for it. "BTFATH" - Buy the fucking all time high. http://www.urbandictionary.com/define.php?term=BTFATH http://www.urbandictionary.com/define.php?term=BTFATH
- inyourtenement 13y ago
  Don't time the market. Timing the market gives you two chances to screw up -- when you decide not to invest, and then when you decide the time is right. Or to put it more concretely, there is a long chain of "all-time highs" before the last all-time high. You would miss out on all that investment time if you avoided the market based on all-time highs. And then a correction comes -- but is it the one you were expecting or is there a bigger correction in the wings? In the end, one never knows. None of the rules of thumb are reliable. And you can shoot yourself in the foot far more by trying to time, than by just buying and holding.
  - meric 13y ago
    You're timing the market if, for whatever reason, you haven't invested in the past 5 years, and now that the market is at all time highs, decide to allocate 100% of your assets into the market. I hold my suggestion to the OP, keep a portion in cash.
    - inyourtenement 13y ago
      That's not really true, and not what people mean by "timing the market." Thinking the market generally goes up and one should invest in it is not timing, no matter when you think it. Repeating the phrase "all time high" as though it indicated the future is precisely timing. It's been shown that if you have a lump sum of money, it's most often better to dump it all in the market as soon as possible, rather than gradually buying in. Of course you shouldn't put 100% of your money in the stock market, your advice was reasonable.
      - meric 13y ago
        I still think, unless you're investing a constant amount of money every X period, you're timing the market, since you're still subconsciously or consciously picking when to invest into the market depending on time. The pitfall with "Thinking the market generally goes up and one should invest in it is not timing" is, the thought only occurs after the market has gone way up, rather than occurring unbiasedly between instances when the market has gone way down or way up.