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We'll show you how to get a better understanding of the markets and become a confident, competent investor. And we lay it all out for you in plain English (well, a Southern variety of English, anyway). Hey, you work hard for your money - learn how to make your money work hard for you!
Is It Too Late to Get Into this Bull Market?
With the fantastic - and sometimes unexplainable - bull run that we have had for the past 5 + years, many market gurus have recently become very cautious about stocks. Some have gotten downright bearish! Their reasons for worry cover everything from stock valuations to rising interest rates to global issues and more. But the common concern to all of their hand-wringing is…Father Time.
That’s right, a lot of gurus are afraid this bull market is too old - too “long in the tooth,” as we heard one of them say. According to history, they are right on the money: this 5 1/2 year streak is about 3 years longer than the average length of a bull market. Here’s a little peek at bull and bear market stats since 1929:
> BULL MARKETS average length - 2 1/2 years
longest bull market - 9 years
> BEAR MARKETS average length - 10 months
longest bear market - 20 months
So yes, they are right. This bull run is long in the tooth. But some of these gurus have been preaching this for a couple of years now and the folks that they scared out of the stock market along the way have missed out on almost 600 points of upside in the S&P 500. For us 401(k)/IRA investors, that’s a huge chunk of gains to miss out on!
As trend following investors, we know that markets constantly cycle from bull to bear phases as our economy cycles through its phases. That’s just how markets flow - we know that and we expect that. What we don’t do as trend followers is try to guess, anticipate or “time” these market cycles - that is a fool’s game, a loser’s game. We make portfolio moves based on established major market trends, not valuations or calendars.
But as awesome as a trend following investment method is, it still doesn’t answer the question, “Is It Too Late to Get into This Bull Market?” Trend following, like all other investment strategies, has little “predictive power.” So we can’t tell if or how much longer this bull run will continue.
Obviously, the best time to buy stock funds is near the beginning of a bull market. That was 5 years ago. What if you just got a job that offers a 401(k) or IRA plan? What if you just received a nice inheritance? What if you have money you want to put to work right now? Is it too late?
In a perfect world, you’d throw that money right into the stock market and the uptrend would continue. In a really perfect world, the market would have the 10 to 20% correction everyone’s been expecting and you could buy in cheaper, then the uptrend would continue. In a perfect world, this investing thing would be a cinch!
The real world, however, is different! Here’s what we’d do (and remember, we don’t have any fancy initials or titles behind our names, just lots of experience!): split the money you have into your various asset allocations, then gradually buy into a couple or three stock index funds with the portion of your money that you’ve allocated to stocks. Spread your purchases over a period of time to take advantage of pullbacks or corrections and to make sure that the bull market continues.
> We like to buy (and sell) in thirds. In other words, if we have $3000 to invest in stock funds, we’ll start with $1000. In a few weeks, we’ll spend another $1000. And if the uptrend still looks good a few weeks later, we’ll invest that last $1000. There are variations on that theme: some folks will do percentages, maybe spending 50% of their investable cash, then 25%, then 25%. See what method suits your investment style, but we like buying in thirds (for more info, go here) - it’s a whole lot easier on our nerves!
This bull market could go on to match that 9 year record. Or it could be over tomorrow. No one really knows - no one. We just trust our charts, practice good money management and try to tune out the gurus...
NEWS YOU CAN USE
"Top Performers Among Biggest Mutual Funds"
from Investors Business Daily
"S&P Study: Most Mutual Funds
Don't Stay at the Top for Long"
"The Target-Date Industry in 5 Charts"
"Prudential Launches Short-Duration
Muni High Income Fund"
"US Commodity Fund Receives a
5-Star Overall Rating"
VIEWS YOU CAN USE
"This Bull Market Could Last Another 15 Years"
from The Exchange
"The Indicator That Proves the Bull Market is Ending" from Yahoo! Finance
"7 Market Myths That Make Investors Poorer"
"30 Reasons to Fall in Love with Index Funds"
"Beginning Investors Should Weigh Perks of Index Funds"
from The Trib
Summer Reading List
It's nice to while away the lazy, hazy days of summer with a good book or two - especially books that will help you become a smarter, more confident investor!
These selections may not turn any heads at the pool or the beach, but they'll sure make your bottom line take notice!
<<<<<<<< Clicking on these book images takes you to Amazon.com via our affiliate link. You won't pay a penny more for what you buy, but we do get a little moolah for sending you there - and that helps us cover the costs of keeping our website running free!
Here are a couple of very simple retirement calculators courtesy of our friends over at Calculator Pro.
Here are the figures we used:
> Required Annual Income: we put in what we're making now (we don't buy into that "plan to spend 70% of your working income in retirement" idea!)
> Years until Retirement: we shot for age 65, but who really knows, right?
> Years after Retirement: we sure hope to have 20 good years of doing what we want to do!
> Annual Inflation: we used 3.5% (maybe go a tad higher to be safe?)
> Annual Return on Balance: we used 7% (maybe go a tad lower to be safe?)