When is it a good time to invest? This is a question that almost all investors face at some point. The fortunate investor will quickly realize that the best time to invest was a long time ago, and the second best time to invest is today. So, they mindfully begin planting the seeds today believing they will reap the growth of those seeds many years into the future.
Mesmerising chart inserted here. Please ponder the question, “When should I invest?”
For some unfortunate investors, there is always a reason not to invest. They might say, “The market is too high; it will fall as soon as I invest” or “The market is doing horribly, I’m not investing in this mess”. Others believe they can successfully ascertain what will happen in the future, so they try to “time” the market. These folks seem to be always congratulating themselves for getting out with very little loss before the thing really crashed, or getting in and only missing out on 50% of a major run-up.
I am not a stock chart guru, and I’m not a market timer. But I do read a lot of financial news and subscribe to several market forums. On these websites, there is never any lack of charts with lots of moving averages, bollinger bands, MACD indicators, Fibonacci levels, etc. drawn on them. For the long term investor (not a trader) I believe these charts and tools are rather useless.
Repeat of mesmerizing chart from above:
For some context, this is 5 years worth of data. Now that you have pondered the chart above twice, does this look like a good investment vehicle? Before you say yes, remember the phrase “This too shall pass“. Many would have said yes because it ‘looks profitable’ or ‘it has momentum’ or some other very smart sounding phrase. Next is a chart of the very same investment vehicle immediately after the above timeframe.
This time, you are looking at about 2 years of data for the same investment. Oops, maybe this isn’t such a good investment vehicle after all. Once again, ponder the chart above, and ask yourself, would you invest in a product that is doing so poorly? Before you say no, again, remember the phrase, “This too shall pass“.
Ok, here’s the last of the mesmerizing mystery investment vehicle charts:
The above chart is the same investment vehicle immediately following the last chart’s timeframe. So, if you said, “No, I will not invest in something that is doing so horribly”, you may have been saying no to some very handsome gains. By now, you may have guessed that we are looking at the SPDR® S&P 500® ETF (SPY : $SPY). Because I like really like charts, I will now present the same charts with actual dates and other data on them.
SPY 2002 through 2007
SPY 2007 through 2009
SPY 2009 through 2017
Now, this is not an endorsement for the SPY ETF or any other S&P 500 index fund. In fact, I do not invest directly into an S&P 500 index fund myself because we use the PowerShares BuyBack Achievers Portfolio (PKW : $PKW) for our U.S. Large Cap Blend equity exposure. Rather the point I’m trying to get across is that whether things are going well or not so well in our portfolios, I think we need to keep in mind the fact that “This too shall pass“. I am not recommending people adjust their portfolio weightings, or hold more cash or anything like that. I simply want to remind the long term investor at this time while the stock markets are doing great, that when things do change and it gets gloomy for a season or two, you need not panic sell or doing anything differently in your portfolio because “This too shall pass“.
For those who have continued reading up to this point; here’s where things get really good. Are you still uncomfortable about buying at all time highs? My friend, this need not be. If you only invest in a few major index funds, you know it’s been a very long time since we’ve seen anything that looks like the chart above for the SPY ETF during 2007 through 2009. If you are willing, there are many other opportunities in the investment world than just 3 or 4 major indexes. Do you recall how oil stocks crashed in 2014-2016? How about how poorly biotech stocks performed in 2015-2016 during the presidential election cycle? And then there was that time a few years ago when the FED began tapering and raising interest rates and the interest rate sensitive equities such as Utilities took a big haircut in price. While many investors were hitting the exits, others who remembered the phrase “This too shall pass” were able to buy shares in these industries dirt cheap. I invite you to check out my daily charts that show which sectors, regions, countries and market cap indexes are down on their luck and giving investors opportunities to buy equities when they are on sale. Our market history books are full of investors who were willing to look past the fog of bad news surrounding market corrections, recessions and depressions and buy equities cheap. The reason they were able to buy low and be successful is that they knew in their hearts and minds that “This too shall pass“.
Above is a sample of my daily chart from 11/10/17. Each ETF listed has a history of wonderful long term returns. But, each and every one of them has also experienced major downturns. That is when I buy, during downturns. I invite you to do similarly. Nobody is forcing you to stick with 3 or 4 asset classes. It’s you your money; it’s your portfolio and the entire investment world is your oyster.
Thank you for taking the time to read this article.