Jun 26 2009
Long-Term Wealth Building and Market Timing
I was thinking about my 401k plan this morning on my way into work. This plan is only two years old at this point, so we’re not talking big bucks here. That’s a good thing, though. It means there wasn’t much exposure when the markets started turning south. So basically I’ve been averaging down my investments, which in this account are all in equity funds of one flavor or another. Moreover, because of raises my contributions are higher now than they were back at the beginning. That means my purchases at these lower levels are bigger than they were at higher prices.
The bottom line is that when the markets do get solidly back on the bullish path – whenever that might be – I’ll be in a decent position to benefit.
My thinking this morning revolved around ways one could adjust investment account contributions based on market peformance. Coincidentally, JD at Get Rich Slowly posted on the subject of market timing where investments are concerned. He did a great job of sharing his experience involving reducing some of his stock fund holdings for asset allocation purposes and the whole “Maybe it will go higher?” and “Shoot! I sold too early” thought process that always comes up in those cases.
JD’s main point is one I fully agree with. When it comes to long-term wealth building through investment, steer clear of market timing. You’re never going to get it just right, so focus instead on having a strong, solid investing strategy and sticking to it.
Here are some other posts which might interest you:
