Is it smart to invest when the market is up?

Dear Pete,

Great podcast! I identified with the guy’s situation (Episode 01: Scott) nearly 100%. The question I had that wasn’t on the podcast is that I know I need to meet with a financial advisor and invest like the guy on the podcast because I too have money sitting in savings doing nothing, but the timing component concerns me. Markets are at an all-time high, would I be better served to wait until markets are down before I jump in? My concern is that if I invest my 100k and then the markets retreat right away than I’m not in a great situation for a few years until it comes back. I know no one knows the future of the markets and how bad a downturn might be or how long it might be until it comes back, but I still feel like I want to hedge in terms of risk before I jump in. Any thoughts would be appreciated!

Brandon

Hey Brandon, totally fair question. And surprisingly (or not surprisingly) seasoned investors struggle with this same question. The difference is that regular investors have money dripping into the market every month. Investing incrementally helps smooth out the bumps in the market. For example, if the market were to fall like crazy this month, you would still contribute to your 401(k). The difference is that next month you’ll be able to buy more shares at a lower price. But since you have a large sum of money to invest, your concern is justified.

It’s important to remember it’s not an all or nothing question. You do not have to invest all $100,000 tomorrow. It absolutely makes sense to trickle the money in. Why not invest $25,000 a quarter for the next year? Or even $8,000 a month for the next year? You are moving from zero market risk to some market risk, it’s a scary transition. You and your money are currently sitting. It’s time for you to stand up and get moving. But you don’t need to break out into a sprint. Walking will do. And as you already know, a (good) financial advisor will help you do this.

Like any new investor you want to time the market, and I get it, everyone wants to know the secrets of the market. Though as you surely know, it’s just not quite that simple. I did a fairly lengthy discussion on market timing this week on The Pete the Planner Radio Show below. Around the 6 minute mark is where I get heavily into timing, though the first 6 minutes are devastatingly entertaining as well.

Best of luck Brandon!

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