If you’ve checked your investment accounts lately (401k, IRA, 403b, brokerage accounts, etc.), you may be asking yourself “can this stock market go any higher”? With all the negative talk in the press about how poor the economy has been over the last two years, many people might be surprised to learn that the stock market has more than doubled in value since the “Great Recession” of 2008.
If you’re like me, you might also be wondering if now might be a good time to get out of stocks (perhaps park your money in a money market account) and then buy back in after the market has gone back down. After all, I believe there is at least a 95% percent chance that the Dow Industrial Average will dip below 12,000 points before I retire. What if I pulled out today while the market was near 13,000 and bought back in when the market went down? Wouldn’t that be the “smart” and “financially savvy” thing to do?
Well, as I learned during my day trading experiment when I was in college, there is a whole lot more to investing in the stock market than simply setting guidelines of what price to buy a particular stock or mutual fund.
In my opinion, most people (including myself) lack the discipline to “time” the stock market with any sort of “logical” investment timing strategy. More often than not, I’ve seen friends sell out of the stock market after a few days of solid gains only to see the stock market continuing to rise after they sold out. They panic, thinking the market will go even higher, and then buy back into the market, eventually the market does come back down (a few days or a week later) and they are worse off than had they done nothing at all.
The reverse scenario often plays out when people buy back into the market when they feel the market has “hit bottom”. They buy back in only to witness the market continue to go lower and lower.
I’m not one to take chances with my retirement accounts. There will always be the story of those one or two coworkers (or friends) who supposedly sold out of the market at the height of the Internet Bubble and bought back in just as the market was bottoming out. The reality is, those stories are few and far between and were most probably accomplished with a great deal of luck rather than some keen investing insight.
When it comes to building a healthy retirement portfolio, I’m a strong believer in consistent and frequent contributions to your retirement accounts regardless of whether the market is trending up or down.
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