My cat Augie loves to lie in the sun all day. Who wouldn’t? But even in sunny San Diego, it sometimes rains.
Augie hates that, and he turns away from the open door in disgust. Then he goes to a different door to be let out.
He’s looking for the door where it isn’t raining outside.
Augie hasn’t learned that when it rains, no door provides relief. You just have to wait out the storm.
Many investors have the same mindset as Augie. When they spot rain on the horizon, they seek a safe haven to yield sunny returns during the storm. But like Augie, they must wait it out until the sun re-emerges.
Do you see a storm on the horizon?
With record stock market returns coupled with intense volatility, and global unrest coupled with domestic political concerns, the outlook is unsettled.
Here is what I believe the future holds, and what you can do.
The Coming Recession
I am not Howard Ruff, predicting dire downturns, but I firmly believe in the economic cycle of growth and recession.
The stock market is a very accurate leading indicator of economic cycles: it begins to decline about six months before recession, and takes an upswing about six months before economic recovery begins.
If you believe recession is on its way, stash cash so you can buy stocks when prices begin to decline.
Periods of recession tend to be short, so begin investing shortly after the market drops, and keep investing regularly.
Buy the Dips
It’s much harder to predict the stock market than the weather.
Much of the gain from a bull market occurs rapidly at the beginning of market recovery.
A market timer has to be right twice, getting out before a decline and getting back in before the rise. That is why few market timers are successful.
It’s better to buy the dips, with regular monthly investments, than to do the hokey-pokey market timer’s dance.