On November 12, the world was still reacting to the election of Barack Obama to a second term in the White House. The financial media began its relentless coverage of the fiscal cliff. Market confidence was down, and so were the stock market indexes, immediately following the election results.
This seemed to me to be a good time to ramp up investing in index funds. While others are panicking, maintaining a calm outlook and a positive attitude might help my investments prevail. I wrote that it may be time to shift money into stock funds if one was waiting for the right opportunity. I took my own advice, but I was cautious. I began using some cash I had stored in money market funds, waiting for a good opportunity to invest in stocks. To me, this was it.
So far, in general, that turned out to be a good decision.
I don’t want to get into the business of prognosticating stock market moves. That would be a dangerous endeavor. Timing the market is sure to backfire in the long run, but I still believe in the concept of buying on what appear to be dips and looking for panic or exuberance in the market and moving against that trend.
The S&P 500 index today, Valentine’s Day 2013, is close to its ten-year high. Yet a quick survey of the major mainstream financial media outlets do not seem to have a plethora of positive stories. During what might be a peak, there might be strong opinions declaring how the stock market is back, how the Dow Jones Industrial Average will reach 40,000 by 2015, and how stocks are the only keys to building wealth. Instead, the only market related story I’m finding today is about 401(k) balances being at an all-time high, but that seems to be the result of a company producing a well-distributed press release.
Investigative journalism isn’t really important when companies can just tell reporters the news.
While November 12 was a good day to get into the market, at least based on its performance so far, I remained cautious. I starting using a dollar-cost average technique to move cash into stock (and bond) funds every other week. The automatic investments end tomorrow. As a result of this plan, I kept buying as the stock market increased. The performance of the stock funds moved alongside the S&P index. The bottom line is my performance would have been much better, and would have been close to what the S&P 500 index is showing, had I invested all I could at the start of this period. But it would have been riskier had I been wrong about the stock market’s direction.
Regardless of this performance over the last three months, what’s really important is the performance towards the end of my investment’s life, when I decide to start taking an income from the investments or when I want to sell.
With the stocks reaching their ten-year highs, I have to wonder if now is the time to start moving out of stocks and begin waiting for the next opportunity. I don’t think it’s time to exit just yet.
- While it’s dangerous to base future predictions on past results, history says stock markets perform better when a Democrat is sitting as President of the United States. If that holds true, it could mean at least another three years of moving in the right direction.
- I don’t see any irrational exuberance in the market that would lead me to believe there is a bubble.
- We’re pulling out of the most expensive military occupations overseas. Military expenses drag down the economy. We may never see a World War again because they’re simply too expensive to run, but foreign occupation is an economic concern.
- Just like the fiscal cliff, another arbitrary political deadline is approaching in March. The fiscal cliff deal pushed back the automatic budget cuts a few months. Despite the likelihood of everything being resolved in the end, this uncertainly can keep stocks down as investors aren’t sure what the future will bring.
I don’t plan to sell my investments right now, despite the stock market reaching a ten-year high. It’s possible I could be looking at this decision as a mistake down the road, but it seems that economic signals are pointing towards the stock market having more room to grow.
With the S&P 500 index reaching ten-year highs on Valentine’s Day, are you loving your stock market investments or is it time to break up?
Published or updated February 14, 2013.