Author Topic: Now we have Correction, do I invest my extra cash right away like normal?  (Read 1746 times)

andysandp

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I know the general rule is once you get some cash, you should invest it into SP Index right away because you can't time the market.

Now we have a 10% dip.  Am I supposed to do the same, just invest more in SP index right when I get some money?  The reason is because you cant' time the market right?

Or am I supposed to wait a little because corrections usually last longer then just a week.

Any thoughts?


andysandp

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Re: Now we have Correction, do I invest my extra cash right away like normal?
« Reply #1 on: February 08, 2018, 05:23:17 PM »
I faced the same question in the past.  At the time I thought, maybe I can watch it fall even more before buying in.  But what happened is that instead of buying in at a 10% discount, the market rose and I bought in at about 5% discount.  So here's what I would say: Anytime you can beat the market by 10%, take that opportunity.   It's not easy to time the market but if you get lucky enough to, then a 10% win is not too shabby.  So if it were me, I would invest that extra cash. 

(Keep in mind that I'm just some idiot on the internet. Take responsibility or your own decision and whatever you do, own it.)

When was it when you had opportunity to buy at 10% discount but failed?  The last time there was "only" a 10% correction was in 1997.  Since then the corrections have been 12% or more.

PS, I'm just an idiot too, trying to understand the general rule.

Thanks!

Mr. Green

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Re: Now we have Correction, do I invest my extra cash right away like normal?
« Reply #2 on: February 08, 2018, 05:51:11 PM »
I faced the same question in the past.  At the time I thought, maybe I can watch it fall even more before buying in.  But what happened is that instead of buying in at a 10% discount, the market rose and I bought in at about 5% discount.  So here's what I would say: Anytime you can beat the market by 10%, take that opportunity.   It's not easy to time the market but if you get lucky enough to, then a 10% win is not too shabby.  So if it were me, I would invest that extra cash. 

(Keep in mind that I'm just some idiot on the internet. Take responsibility or your own decision and whatever you do, own it.)

When was it when you had opportunity to buy at 10% discount but failed?  The last time there was "only" a 10% correction was in 1997.  Since then the corrections have been 12% or more.

PS, I'm just an idiot too, trying to understand the general rule.

Thanks!
Actually there was a 10% correction of the S&P 500 almost exactly two years ago, in February 2016. If you search this forum, you'll find quite a few "the sky is falling" threads on this very forum. I remember it well because the second the market dropped 10% it immediately popped right back up and was setting new all-time highs by July. There was a comical thread where someone talked about going to all cash. The poster disappeared so who knows what that person did but it was yet another wonderful lesson in why you can't time the market.
RE in June 2016. Wife is joining me at the end of June!

fmzip

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Re: Now we have Correction, do I invest my extra cash right away like normal?
« Reply #3 on: February 08, 2018, 07:08:14 PM »
You stick to an investment plan regardless of what the market is doing. Set an asset allocation of stocks and bonds and invest on your regular basis. AVOID the noise of what the market does day to day month to month year to year.

End result, you will be wealthy!
Not looking for face-punches; this is our choice, our life, our plan

ChpBstrd

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Re: Now we have Correction, do I invest my extra cash right away like normal?
« Reply #4 on: February 08, 2018, 07:33:11 PM »
Actually, you should sell put options against your cash. Sell them deep into the money so you'll probably be assigned. That way, you get to pocket the option's time value premium and still end up fully allocated at a set price. Option prices are sky high because of the recent volatility. It's free money for stock buyers. This is an easy way to beat the market by 1% in the next few weeks, as compared to clicking buy right now. That said, clicking buy right now is the 2nd best option. Sitting and waiting for further drops (recency bias) is usually a losing proposition.

Accidental Miser

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Re: Now we have Correction, do I invest my extra cash right away like normal?
« Reply #5 on: February 08, 2018, 07:39:37 PM »
You stick to an investment plan regardless of what the market is doing. Set an asset allocation of stocks and bonds and invest on your regular basis. AVOID the noise of what the market does day to day month to month year to year.

End result, you will be wealthy!

This.  I just increased my 401k percentage some to front-load my contributions some for this year. 

Make a plan (invest x percent of income each month) and stick to it, month in and month out.

Mighty-Dollar

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Re: Now we have Correction, do I invest my extra cash right away like normal?
« Reply #6 on: February 09, 2018, 12:53:00 PM »
I know the general rule is once you get some cash, you should invest it into SP Index right away because you can't time the market.

Now we have a 10% dip.  Am I supposed to do the same, just invest more in SP index right when I get some money?  The reason is because you cant' time the market right?

Or am I supposed to wait a little because corrections usually last longer then just a week.

Any thoughts?
Waiting IS market timing. NOBODY knows if the bottom will be reached today, next week, next month, in 3 months, etc. Nobody.