One thing I enjoy the most about running an investing platform is that I get the opportunity to connect with thousands of investors. We can share ideas and their questions often leads to great article ideas. This is exactly what happened the other day when a member asked me my opinion on an article from Market Watch asking a solid question to all investors:
Will there ever be a time to buy in at lower levels?
In this article, Market Watch highlights the possibility of buying shares at a much lower price if we could just wait for the next market crash to happen. The author mentions a few past opportunities:
- After the March 2000 dotcom bubble high, investors could have bought the S&P more cheaply for seven years.
- After the October 2007 housing bubble high, investors could have bought the S&P more cheaply for six years.
- And at the S&P low of 666 in March 2009, weren’t much higher prices a virtual certainty in the years to come?
When I read the article, I had a smile on my face. This reminded me some quotes I found from other well-known financial information sites:
“Of course, with stocks at all-time highs, some seem to have nowhere to go but down.”
“At ValuEngine.com we show that 77.8% of all stocks are overvalued, 45.2% by 20% or more. All 16 sectors are overvalued; consumer staples by 17.6%, retail-wholesale by 26.4% and utilities by 9.8%.”
“The market has jumped nearly 30%. This means the stock market’s rally has been based solely on people paying more money for the same amount of earnings — this is known as “P/E multiple expansion.”
~ Motley Fool.
Interesting enough, those quotes are from 2013 and 2014! Since 2012, the countdown for the bear market has started. It will happen at one point in time. When? That’s a multi-billion-dollar question. If one knows the answer, he should sell everything he has, short sell the market and he will be the next market multimillionaire :-). For example, if you would have sold on May 1st, 2017 and bought back on October 1st, 2017, you would have missed 6.43%. If you waited until the end of the year, that’s 13.50% left on the table. The worst part is that you would be filled with doubt and would not even know if October 1st would be the right time to enter in an all-time high market, right?
What I Did Last Year
Those who follow this blog for a while remember that I invested 100K in the stock market between September 2017 and January 2018. It took me a month to invest 76K and I completed my portfolio with a few transaction afterward.
Was I afraid the market would crash the following month? Nope.
Did I consider waiting to see what would happen next on the market? Nope.
Did I think I could buy those shares at a cheaper price after a market crash? Nope.
Instead of patiently waiting to get a bargain, I’ve used tools I’ve developed for investors and built my own portfolio. I followed my investing rules and built a well-diversified portfolio showing strong dividend growth perspectives.
As of May 18th, 2018, my Canadian portion was up by 17.9% and my US portion up by 21.1%. This is how much money I would have been left on the table if I had decided to wait. But the worst part is not the virtual money you leave on the table, the worst part is the doubt filling up your mind. Each time you try to time the market; you wonder if you are making the right decision. You wait and you don’t know when it’s the right time to dive in. Once you did, you don’t know when it’s the right time to get out of the water before sharks arrive. And once you get out… Well… you wonder when it’s the right time to come back!
No one likes to lose money. We wall wish we could invest the bulk of our portfolio during a market crash. But this is called being lucky, not being an investor. I can’t tell you what you do (obviously), but as the article asks a question, I’ll answer with another one:
If now is the time to sell and wait, what will tell you the time to buy back?
At which point it will be a good timing? After a 20% drop? or 30%? or 50%? The more you try to time the market, the more doubt you will have around your investing strategy. In the meantime, I rather gather dividend payments in my account than doubts in my mind!