Is the market too hot or too cold for your temperament? Is it time to dive back in or dodge back out?

If you’ve not yet taken the time to form a personalized investment plan, these are understandable questions. In fact, recent market conditions may have uneasy investors’ emotions veering from one extreme to the other within a matter of days.

We love the perspective shared in this January 11 Global News article by Money/Consumer columnist Erica Alini, “Is it time to jump back into the stock market?

Alini’s answer reflects our own take as well:

“The short answer is no one knows and you don’t need to worry about it, anyway.”

To expand on the sentiment, Alini explores the many reasons why questions about market timing are red herrings to begin with, including:

  • If you jump out to avoid a downturn, how do you know when it’s time to leap back in? (All evidence suggests, you don’t.)
  • Trying to avoid downturns and chase upswings typically leads to selling low and buying high – exactly the opposite of what we’d prefer as investors.
  • By sticking with a low-cost, sensibly balanced stock/bond mix, you’re likely to be better off than if you engage in nerve-wracking market-timing tactics anyway.
  • Even professional money managers fail to consistently “beat the market.”
  • Some of the markets’ best returns have historically arrived in the early stages of recovery. If you’re sitting on the sidelines awaiting a clear sign, it’s too late; you’ve missed out.

 

Admittedly, one of the reasons I’m especially pleased to share Alini’s article is because she interviewed me as she was drafting it, incorporating several of my suggestions into her work. After presenting the reasons investors should avoid trying to time the market, she offers a number of suggestions on how to resist the temptation to react to either rising and falling markets, “when we get excited as the market smashes through record highs and when we get sweaty palms at the sight of our shrinking money piles in a downturn.”

What are those tips? As suggested above, it starts with robust planning. To read more (and discovery what else yours truly had to say), I hope you’ll check out Alini’s article today!