And no, don’t bother trying to time the market

I’m not hearing as much rumbling in the hallways about pulling out of stocks, but I’m hearing a lot of rumbling about waiting until the market bottoms out before putting anything in.

Here’s the problem: What if it bottomed out today? I’m not saying it did. But it’s possible. Nobody knows.

I buy every two weeks via a payroll deduction. I get paid every two weeks, therefore I buy stock every two weeks. That’s the way to do it, because it removes the emotional element from it. No matter what happens, I make a purchase every two weeks. I’m actually hoping the market manages to stay down at least a week, since my purchase will probably happen on Friday and may not finalize until next Monday. Then again, we could be in for a few weeks where we go down 100 one day and back up 100 the next, with a slight upward or slight downward trend.

What we do know right now is that prices are back to what they were in January. So, unless we have a huge rebound between now and Friday, I’ll get more for my money this week than I got two weeks ago. And if the trend continues downward, next pay period I’ll do even better.

What the market does in 2011 doesn’t matter. It’s what it does between now and the time you’re cashing it out that matters, and if that’s still decades way, what the market is doing on a short-term basis matters very little.

If you could predict when the market is going to be down, and only buy when it’s down, then sure, you’d make more money. The problem is, when you try to predict whether the market is going to keep going up, or drop, at best you’ll be wrong half the time. I think I’ve done worse than that. Just think how many times you delayed buying gas because you thought the price would be better tomorrow. How often are you right? The problem with both gas and stocks is that prices can change for no good reason.

Buying stocks is a lot like buying gas. You pretty much just have to buy when you have money, then let time and automatic rebalancing (and more time) take care of the rest.

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