16 August 2007

Bit of a short-term dilemma

I have two voices in my head that are fighting each other a bit right now, as they have been for months. With a downturn possible (and now happening) do I keep investing regularly or do I sit on cash for awhile and wait for an opportunity? Well, the keep-investing-regularly voice won. and maybe it should have. But it puts me in an awkward position now.

I want to buy more. We're going to hit the bottom soon, IMO, and I simply don't have a large enough cash reserve to really make the play I want to make. I've been putting it into the market each month. The downturn doesn't scare me, and most of the money I have in the market was put in at levels lower than this, but it would be nice to be able to substantially increase some positions while investors are irrationally pessimistic.

But the only way to do that is to raid my emergency fund, which I'm not going to do. I have a car to pay off, but I likely won't do that for a few more weeks. I won't really be comfortable putting a BIG chunk into the market until a few months after that, when my cash reserves will be stable and my cash flow will be larger. So of course the contrarian in me is saying "I told you so, you should have saved up and waited." But what is a young investor to do? In the long term this decision may not make a huge difference, but I wouldn't be an investor if I didn't fret over such things.

So now a new question. Do I continue to nickel and dime into my Roth, or do I wait this time? The market is down, down, down, but I really feel that it is going to get worse before it gets better. The contrarian in me is now confused. He wants to buy but he also wants to wait because they may be an even better time on the horizon. That would also allow me to build some cash, finish the car payments, and just generally get myself less cash-poor. But I hate to do that when stocks are on sale.

Decisions, decisions.

16 comments:

Beyond the Consumer said...

Is timing the market for a roth a good idea? Wouldn't you be better off saving regularly and consistently?

MEG said...

This is why you should dollar cost average--to avoid worrying and wasting time trying to time the market. I am tempted to wait it out too, and plunge my cash into the market at just the right time. But then I'll be sans cash, and the market could continue to drop anyway.

Just put $100 a month (or whatever) in your IRA every month without fail--regardless of what the market's doing. You'll save time and energy and avoid the heartache of investing a chunk of money only to see the market fall 250 points the next day.

Brad said...

I do save regularly and consistently in the Roth and elsewhere, but I'm willing to raid my cash reserves to put in EXTRA when the market falters. I just don't have the extra $$$ in my cash reserves to do it this time around.

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