Can You Time The Market?
In the market downturn, I heard clients say, “I wish I had some cash to invest.” Yet those with cash were asking “Are we at the bottom yet? Is it over?” So when is the right time to get in the market? The best financial advisors don’t get it right 100% of the time. One Fund Company advisor laughs at efforts to time the market. His focus is on tried and true fundamentals – that has more weight with the success of a fund.
What about the average investor? What can they do? Dollar cost averaging, a strategy that is implemented by systematically purchasing a fixed dollar amount of an investment at varying prices, helps reduce the impact of the market volatility while you are contributing to your account. Dollar cost averaging is consistent monthly investing. You are catching the market on up cycles and on downturns.
What if you don’t have a company 401(k)? You can set up automatic withdrawals from your checking or savings account. The key is to be consistent.
Dollar cost averaging works for those that are in the accumulation stage of life. But, what if you are in retirement? You need to be taking money from your accounts.
Many of the fund companies will do distribution on a pro-rata share from each of your funds/investment. Something of a dollar cost averaging in reverse.
However, this financial advisor likes to be more pro-active in managing monies during retirement years. We look at what the cash flow need is for the coming year. As much as possible we work from dividends and interest. If we need to access principal, we make strategic choices.