(Mostly) Don’t Try to Time the Market

Any wise investor knows that trying to time the market is a fools game, and is bound to lose in the long run to the overall market.  I am not going to challenge the conventional wisdom, but I would like to create a bit of a caveat.  Hands on, time-the-market investing can be fun.  That is part of the reason so many people do it. We want to feel special, to hit it big, to gamble just a little bit.  And if done with a bit of discipline, something like a $5 daily investment in the stock market is a lot better “gamble” than the lottery.

Sure it would be ideal if we could all harness our zen, let the automatic investments plug away, and ignore them aside from the periodic re-balancing.  But speaking for myself, that’s mostly a no-go, I’m still in overly aggressive check my accounts daily mode.  So I propose some market “play money”.  Instead of mentally budgeting excess money in my checking account as playful spending money, I use it as playful investing money.

In place of the adrenaline hit compulsive shoppers get when they buy new clothes with that money burning a hole in their pocket, I get a hit from buying investments.  Now I know some financial savvy folks on the web might say I am wandering towards a slippery slope, so I try to stay within a pretty rigid set of conditions:

1.  I very rarely trade or sell investments I’ve already made, once the investment is made its there for the long haul

2.  I only* invest in the investment funds/accounts I already have in my portfolio.  This is where a somewhat overly wide-spread portfolio is helpful, giving me a variety of investment choices depending on what I feel about the market timing 😉

3.  *On rare occasion I will buy individual stocks through Sharebuilder, only on the automatic $4 plan or for one of our free birthday investments, but even then, only name brand stocks, no penny stocks or excessive speculation.

4. Ignore the co-workers the next cube over talking about heads and shoulder and elbows and knees… forget trying to spot some daily market trend/imbalance.  I’ll leave that to people much smarter than me and invest in something I do know; that the market goes up in the long run, as do good stable companies.  I’ll just try to find a broad sector or company that isn’t overly expensive and has long term prospects.

We already have over 60% of our net income auto-investing in various safe, cheap, broad, mostly index funds, but on occasion when we’re good enough to live on  less than 40% of our income it leaves some play money.  Maybe if I tire of the manual investing, or have a change of heart, I’ll up those auto investments.  But for the time being I have some fun trying to time the market; what do you think this month? Are foreign stocks undervalued?


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