Stop trying to time the market, because you can’t be sure what is the top — or bottom.
It’s far better to have a coherent long-term investing plan that you will stick to even in bad times.
That’s the advice of Chris Costello, a certified financial planner.
“It seems counter intuitive, but when markets are on a downward trend, that’s the best time to buy,” Costello says.
He adds that the average investor should not be in any one kind of investment, but several categories, including stocks, bonds and cash. He or she should also rebalance from time to time.
Money pros say the longer you can consistently invest in the market, the better you can recover from a crash.
Conversely, going in and out of the market means you have less time to recover from a crash or even a decade of bad returns.
Hunter Lewis, a money consultant with his own firm, partly agrees that investing for the long term makes sense. But he argues that getting in at the right moment and avoiding jumping into the market just as a bubble bursts is also important.
“If you get in the right time and then you stick it out, you do pretty well historically. But you can get in at the wrong moment, and then it can take forever to get your money,” Lewis says.
Danielle DiMartino Booth, a former Federal Reserve adviser, agrees.
“My mother is 71 years old, and she doesn’t have a penny in the stock market. It is because everything she has in savings she needs to live on.”
Booth says a successful long-term plan depends on your risk tolerance and when you will need to access your investments.
To avoid shooting yourself in the foot, she offers simple advice: “Know thyself.”
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