Invest Now or Wait – 3 Key Considerations

Invest Now or Wait – 3 Key Considerations

by Tad Kastman

With US equity markets reaching all-time highs this fall, you may be concerned about investing at these levels. Maybe you’re waiting for a correction before investing excess cash from a recent distribution or bonus. Who can blame a person that is actively thinking about investment timing and managing downside risk? That’s engaged investing. However, making investment decisions such as these are best supported by time-tested principles. Let’s take a closer look at three key considerations that can help move you from thought to action in a wise manner.

Side with History

Since 1980, the US stock market, as measured by the Dow Jones Industrial Average (Dow), has had positive annual returns 75% of the time.1 Historically, it has moved in a stair-step pattern, where gains eventually surpass previous losses. This poses a challenge for an individual investor trying to time the market, because being out of the market may come with an opportunity cost. For example, looking at the returns of the Dow from December 31, 2001 to December 31, 2016, an investor that missed the 10 best days of return would have reduced their annualized total return from 7.28% to 2.60%.2

Missing the 10 best return days of the Dow Jones Industrial Average from December 31, 2001 to December 31, 2016 would have reduced annualized total returns from 7.28% to 2.60%

However, if the thought of investing now still makes you nervous, consider investing your cash through an approach called dollar cost averaging. Instead of investing a lump sum, through dollar cost averaging you invest dollars into the market incrementally over a period of time. This way, you mitigate the risk of incurring downside or missing upside returns in the market by choosing an investment time period that works for you.

While staying invested means you’ll periodically have to ride out some down markets, it will help ensure that you’ll have money invested when the market is climbing, which history shows is more often the case. As the next principle demonstrates, this is best accomplished with an investment plan that incorporates a diverse portfolio.

Manage Market Volatility

Maintaining a globally diverse equity portfolio provides exposure to the return potential from a broad range of equities, whether domestic or international. For example, US stocks, as measured by the S&P 500 Index, outperformed their international developed markets counterpart, the MSCI EAFE Index, from 2013 through 2016.3 However, in 2017, the MSCI EAFE Index has outperformed the S&P 500 Index year-to-date through October, with returns of 21.78% vs.16.91%.4 Longer term history has taught us that these variations in return are cyclical, furthering the case to maintain exposure to equities across the globe.

Diversification through asset allocation is a critical aspect of wise investment management

Additionally, balancing equities with investments in other asset classes may help reduce risk in your portfolio. Traditionally, bonds and alternative investments have provided lower volatility and low correlations to equities, providing a measure of downside protection when equity markets struggle. This type of diversification, commonly referred to as asset allocation, is a critical aspect of wise investment management.

Revisit Your Investment Strategy

If you are already invested and have a long-term investment strategy, great. However, another important principle is to revisit your investment strategy on a regular basis to ensure that it aligns with your financial plan – one that takes a comprehensive look at your entire situation. Consider engaging an advisor to help you craft your overall plan, including your investment strategy. They can coach you along the way, help you to make key decisions and ensure that you stay on track to meet your goals and objectives.

Create an appropriate investment strategy based on your financial goals and objectives, then take action to implement and review it within your overall plan

As you consider your next investment, keep these time-tested principles in mind and avoid the difficult decision of timing the market. Whether you’re investing for retirement or other long-term goals, develop a diversified portfolio that comfortably meets your long-term goals and objectives, and then invest with discipline through the market’s ups and downs.

Key Takeaways

  • History suggests you may benefit by staying fully invested. Instead of trying to time new investments, consider dollar cost averaging your money into the market over time
  • Manage overall market risk through diversified asset allocations to global equities, bonds and alternative asset classes
  • Work with an advisor to help you craft and review the right investment strategy, one that helps meet your goals and objectives

1,3,4 Morningstar Direct, 2 Putnam Investments “Don’t miss the market’s best days” (1/17)



Tad provides investment advice and financial planning as a wealth management advisor for QA Wealth Management.



Past performance of the global investment markets is not a guarantee of future results. Investment returns and principal value will fluctuate and are subject to market volatility, so that a client’s investment, when sold, may be worth more or less than the original cost. Indices are unmanaged and investors cannot invest directly in an index. An index’s performance does not reflect the deduction of transaction costs, management fees, or other costs which would reduce returns. Asset allocation does not ensure a profit or protect against a loss. 2714-1117