Climbing back into the market

Although many investment types warn against market timing, I'm going to suggest that it is a small but important part of any fairly successful investor's repertoire. Basically - at the most correct level - it involves selling assets when they are above a realistic value, and being slow to redeploy proceeds when few or no bargains can be spotted.

Once cash is in hand, however, you should prepare a plan on how to redeploy those proceeds, when "the market" you like (through an ETF), or a particular stock you like, is marked down to the right level.

And just like someone picking his or her way up or down a rock, this involves some careful consideration. For example, since I believe that the market is poised for a fall, I've constituted a plan whereby I step back into the market at pre-determined levels. In some cases, this might be when a specific stock or ETF has hit a certain level, while in others, it's just based on a broader market decline.

The point is, is that I haven't selected a single entry point as the time to redeploy my idle cash back into equities. I have a phased plan. For me, my re-entry points are (generally speaking), a three-tiered structure, using a point around a 15-20% decline in the S&P500 for re-deploying about 50% of my idle cash, and two further points at 25% and 30% declines for the balance.

While some of these points might not be reached, at least I've made a plan on how to maximize the inevitable upswing. And of course that's not to say I'm out of the market entirely - one way bets using all of one's assets aren't a particularly prudent way to invest, in my opinion.


JW

The Confused Capitalist