Wednesday, March 18, 2009

Don't Worry About "Catching the Bottom"

There's a lot of noise coming out from market pundits lately. Is this the bottom? Is it time to buy? To that I'd say "turn off the tv." These prognosticators predicted little to nothing of what has happened during the past year, so now is not the time to start listening to them. When the market bounces, as its doing now, there is often some easy money made in the first moves. But this is a dangerous game to play for individual investors. The market can shed these gains as quickly as they came.

Also, most investors are in less stable financial positions that they were a year ago. Its not a time to take extra risk. Its a time to protect cash. There is one exception. If you have a decent amount of time until retirement, you can put some long-term money to work. Think about index funds. This is your best bet for beating inflation over the long term.

If you're looking for more detail about his subject, and specific names to buy, you can read my recent article published at Personal Dividends online magazine.

Also, here's an article on the subject by Brett Arends from the WSJ.


wsm said...

Index funds? Seriously? That sure worked out well over the last ten years.

Michael said...

Yes, index funds. For the average investor, keeping costs low is very important. Most investors don't have the time to worry about trading in and out of the market, nor the expertise. Professionals have even proven that they cannot time the market. I'm interested what would be the alternative for the average investor? Hedge funds? Can't afford it. Day trading? Very few can pull it off.

My point was that much of the downside risk has been taken out of the market, and it would be a good time to invest some money (not all) into the market. The easiest and most cost effective way to do this is through an index fund. Can the market go lower? Sure. It probably will. But it will go much higher at some point, and the odds are better now than at any point in the past few years.