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Should I invest in the stock market today, or wait to see if it goes down further?

Today’s question is from an investor looking to take advantage of the recent stock market sell-off.

Today’s question is:

Should I invest in the stock market today, or wait to see if it goes down further?



Trying to perfectly time the stock market is a fool errand. And if you are investing for a long time horizon – say 20 or 30 years into the future.  Whether you invest when the S&P 500 is 2600 or 2500 won’t matter nearly as much as it seems to today.

What is important is to set up systematic rules that force you to invest at regularly scheduled times.

There is no perfect answer for this. But lets say you want to start contributing to an IRA. Currently the annual limit is $5,500 per year for those under age 50. That equates to about $458 per month. So, set up an automatic withdrawal from your checking or savings for $458 each month and have it automatically invested. That money goes in whether the stock market goes up, down, or sideways.

Just be sure you have access to no transaction fee mutual fund or ETFs so you aren’t paying a large commission each and every month. At Hylland Capital we use several of the 300 commission free ETFs available at TD Ameritrade so that our clients pay no commissions.

And once you have a plan in place, you can add in extra savings for times like we are seeing today.   

Here is a very simple example: Let’s say you are Saving $1,000 every January 1st and if the stock market was negative for the previous year, save an additional $1,000. Sounds super simple right? How did it work out?

If you have saved $1,000 every year since 1990 into the stock market, you would have $116,000 today. If you invested an extra $1,000 every time the stock market had a negative year, you would have $157,000. There have only been 5 negative stock market years since 1990. So you saved $5,000 extra in total, and have $40,000 in extra money.

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This way, you are saving every year, but you can still feel good investing extra at times the stock market goes down.

Matt Hylland