And it all gets solidified by the way we approach economics as a nation. Giving money to rich people doesn’t create jobs. DEMAND creates jobs and there won’t be solid demand until wages rise, which half the nation is viciously against and is even trying to remove minimum wage to make the U.S. more competitive, so they say, with like… Calcutta. Great. Sucks to be the bottom 98% in Calcutta and we’ll all get to enjoy that soon because of our political stalemate and the greed of our elite. Until we create a tax code that pays people to create money through opening businesses and hiring Americans, and then pay them living wages, this spiral will continue. When and if people are employed and paid decent wages, they will buy services and items and again and THAT will create jobs and real national growth. Won’t happen at this rate, though.
If you came into a substantial amount of money, would you wait till the next market crash to invest?
That’s just asset allocation and portfolio balancing. Yeah, that’s the ticket.
Well, you probably shouldn’t have more than say, 50 stocks in your portfolio unless you’re doing it full time, I’ve got around 45, and some of them are stocks that I only look at quarterly, and none of them are stocks I need to look at every day. Ten great picks out of ten would be a lot. You’re going to pick up a dog or two. I try not to let any stock become more than 5% of my holdings, except for GE, which I bought like a madman back when it was under $10.00 a share after the dividend cut. That I’m way overweight on, but can’t bring myself to part with.
I feel similarly, I have about 20. My portfolio isn’t large enough to have $10k in each (well, it is, but I don’t). My “minimum investment floor” in a single stock is $1000. If it goes up 10%, I’ve made the same 10% that I’d have made had I invested $100,000. But I don’t have $200,000 to put into 20 stocks, and putting it all in one place isn’t diversification.
I could put it all in mutual funds (and much of it is, which is why I don’t have enough for $10k in each of the stocks I own), but for me, individual stocks is a learning experience. Not only in how to track and analyze a stock, but in my own personality - will I let go of it appropriately, or will I hang on inappropriately? The only way for me to learn dispassion is to do it repeatedly, I need to do that with a lot of little investments. And since I get 100 free trades a year with my brokerage (and have never used more than 20), it doesn’t cost me anything.
But I had to make this decision about two years ago, and put it in over the course of a year into mutual funds in a couple of categories - something that pays dividends, something that grows, and an index fund. Vanguard’s version of each. That way if the market did a 30% dip the week after I put it all in, I wouldn’t be jumping out of a window. But it was more a concession for my nerves than true risk avoidance.
Obligatory Simpsons quote:
No.
Waiting until the next crash is an unwise approach to investing.
When I was 40 I started investing in quality stocks and low fee index funds. I held on, never selling, kept investing and am now comfortably retired.
Make sure, when you do this experiment, that you come up with a precise and well-defined definition for “investing after a crash”. Does it mean x% lower than the last peak? x% lower than day 1 of your test range? x days of dropping prices?
Also (and this should be obvious, but you’d be surprised how many people do it wrong), you can only consider previous data when determining when to buy on a given day.
If you don’t do this, you can very easily end up with a totally skewed and unreasonable result by using a different definition for a crash (whichever one works better for the sample you’ve tested on), or even worse, just magically investing at the bottom of the market each time. That will prove that someone with perfect foresight can indeed make money timing the market, but that result is neither surprising nor useful.
The simplest argument I know for why timing the market is a bad plan:
On average, you expect the stock market to go up in the long term (otherwise why are you investing in it). Therefore, on average, you should expect that the prices tomorrow will be a bit higher than the prices today. So your best expected value is to invest immediately.
Note that this strategy does increase the potential for loss. If you want to limit the chance that you invest right before a crash, then averaging into the market (say, invest 1% a day for the next 100 days, or 10% a month for the next 10 months) will limit your downside risk, but it will also reduce your average earnings.
Another call for averaging in, except I say do it more slowly. Market cycles are actual things and so we can say, with 99% safety, markets will go down at some point, just not when they will go down. Cycles last, what, five years on average? So if you make paying in that 100k last 5 years you’ll have a good chance of buying low with some of it.
This’ll also give you time to look around and choose what you feel comfortable with; if you decide you want low risk (with probably lower return) you choose a World index tracker, or maybe you like risk and choose individual penny stocks, or a mixture or something in between.
Or buy OJ futures, whatever suits your investing preferences, but you won’t know your investing preferences until you’ve had skin in the game for a while.