INVESTING FOR THE FUTURE, TODAY.
The sixty-four thousand dollar question
When I was a stockbroker, back before they gave us the reputable moniker, financial advisor, the question of the day was should I buy or not yet? And if I had known the answer then, I would not be here writing about it on my laptop at midnight. No, I would be in Tahiti, laying in a beach chair, up to my chest in warm blue-green eighty-four degree water, and drinking Coronas. Then I’d grab my cell phone and call my broker who is still at the office an ten at night, and tell him to drop another million into and S&P 500 index fund.
I can do this because I know the answer to that question on the tip of everyone’s tongues, “Should I pull the trigger, or wait another week?”
The reality of it is, is that I don’t know when the best time is to get back into the market, and if one day I should wake up thinking I have the answer, I have only to think back to the time I put one hundred thousand dollars into PMC Sierra Semiconductor, and the same into Filenet. This was at the peak of the market, and just before the ‘Asian Contagion’, and just before my clients account value went from five hundred thousand dollars to three hundred thousand dollars while his broker scuba diving off the second largest barrier reef in the world.
You can imagine how he welcomed that call that day after I finally mustered up the courage to call him. I had to pause, ear away from the phone, for a good thirty seconds before he was able to say anything suitable to a child’s ears. This has a good ending though. Yes we did buy in at the very peek of the market in that time, and yes he did lose much of his retirement account in a day, but not one year later he was the proud owner of a retirement account with a million dollars in it.
For him, the answer to the question was yes and fortunately for the next 12 months he kept saying yes till he had 1.2 million in his account and I was his new best friend.
However, there are a good many people out there who do not have the same intestinal fortitude as Gary, and would not have given me the green light ever again after taking such a loss on my recommendation. The average investor cannot stomach thirty percent swings in their account and they are the ones who really need to pay attention to the answer, should I or shouldn’t I?
If you cannot stomach big market swings you need to be a lot more conservative, and plan on leaving your investments in for the long haul. By that I mean, seven to ten years. If one looks back through time, you can see that in that time period, whenever you invested, you would come out ahead. If you invested before the crash in 87, ten years later you would be a happy guy even though you had the worst market timing in history. You could have bought into the market in 1929 before the crash and ten years later you’d be a happy guy.
So the answer is, yes, pull the trigger and begin averaging into the market because even if you have the same perfect timing like the 1929 and 1987 dudes, you will still be alright.
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