Putting Money To Work
Friends – After the dramatic downturn in the first quarter, equities have not only recovered but gone on to set new all-time highs. The speed of the recovery against such an uncertain environment has left many investors scratching their heads and understandably anxious. They feel like they missed out, markets are doomed to crash again or they just want to wait for markets to come back down a bit before starting to invest. Unfortunately these types of concerns can paralyze investors’ decision making, which only compounds as markets continue rising, preventing them from moving forward.
So, how do you go about putting money to work when markets are near all-time highs?
When I’m discussing this topic with clients, I recommend a three-pronged approach to get started, minimize regret and take advantage of volatility along the way. This approach includes the following three steps:
- Invest Immediately – Whether you already have a portfolio that you’re adding to or starting from scratch, take whatever amount you have to invest and invest a portion of that money immediately. As with many things, the first step is often the most important.
- Invest Regularly – With your remaining money to invest, pick a period of time you’re comfortable spreading your investments over. Usually this is along the lines of three, six or even 12 months. Sometimes it means bridging the gap from one bonus to another, getting past a certain event, like the upcoming election, or just diversifying your timing enough to minimize any potential for regret. Whatever timeframe you choose, automate the investments and don’t second guess them by pausing or skipping investments to time the market.
- Invest Opportunistically – Finally, if markets go through a significant pullback along the way, this approach gives you the flexibility to pull money forward from your regularly scheduled investments to invest immediately and take advantage of the lower prices you were hoping for all along.
In my experience, the combination of these three strategies provides an extremely useful framework for building your portfolio regardless of market conditions. If markets continue to go straight up, you are glad you began investing when you did and if there are pullbacks along the way you have enough flexibility to take advantage without having overcommitted up front.
If you have any questions about investing today or current market conditions, please don’t hesitate to reach out. I’m always happy to help.
