To enter the market or not to enter the market? That is the question!

I've been a good little saver, stashing away some 60% of my monthly salary over the past couple years. Like many of you I work very hard for my money, and now I've made the decision that it's time to make my money work for me. I'm looking at low-cost Index funds (S&P 500, Vanguard, NASDAQ etc.) to park a portion of my savings (10-15%), as well as a smaller portion of my savings into higher risk investments.

However, being the novice investor & economist I am, I'm hearing a lot of debate about whether or not it is the right time to enter the market. Albeit mostly what I'm hearing is negative.

I'm hearing qualms about an upcoming recession in 2 years time, how index funds are overvalued / overbought, and how interest rates are rising considerably. I'm hearing how corporate debt is at a record high of 45.3% of GDP and companies will face massive financing needs (at higher rates) in the future. Rumors are that companies who are saving money from corporate tax cuts and overseas cash being brought back into the US, are using that money to buy back stock rather than reduce debt.

My question is: Do I enter the market now, or do I wait to enter the market and continue saving? What are WSO's thoughts on the current state of the economy? What would you do in my situation?

Comments (2)

Apr 20, 2018

Where have you had all of your savings over the "past couple years", while equity markets have enjoyed one of the longest and most sustained bull markets in recent memory?

First, if you have substantial wealth built up, I think it'd be worth your time to seek the advice of a good financial advisor (keyword: good). You should create some sort of view of your risk tolerance, goals, and horizon and then allocate your assets from there. Or at the very least, this will give you a sort of home base that you can then adjust your allocation if you want to pursue certain "higher risk investments".

You're never going to time the market exactly correct, and you'll drive yourself crazy if thats always on your mind. If you remain in cash, your relative returns will be abysmal (obviously). Get fully invested, build in some downside protection, and then you can buy some puts on the side if that helps you sleep better at night.

My 2 cents....

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