I’ll admit I’m nervous with my investments right now. Back at the beginning of May, the stock market, as measured by the S&P 500 and other indices, dropped sharply. This was around the time of the “flash crash,” and it appeared to me that the value of my primary vehicle for investment, VTSMX, fell irrationally.
I took that as a signal to buy. I moved $10,000 in my retirement account from a money market fund to the above index mutual fund, which tracks the total stock market. This is the only type of market timing I do. I wait for significant decreases and buy in. My reasoning is that for performance to return to historical averages, dips must be followed by increases. It’s just a question of how long it takes to return to the average.
VTSMX is lower now than it was in the beginning of the month, so on a short-term basis, I timed the market wrong. Had I left this $10,000 in cash and waited longer, I would have been able to get a better price. I still may be better off than I would have investing on a day when everyone else is excited about stock market prospects, and I believe buying when everyone is panicking will pay off eventually, it’s a rough ride getting to that point.
I would like to be able to forget about the stock market completely, but unless I suddenly find myself with a significant windfall and can afford to take less risky investments with lower long-term returns like bonds or cash equivalents, I’ll just have to suck it up and deal.
What is your investment strategy right now?