Is Now a Good Time to Invest?

This is one of those questions that investment advisors and financial planners are perpetually asked. Whether the stock market is rising, plummeting or going nowhere, the answer is almost universally the same: "probably."

You never know what is going to happen next week, but when investing for a longer period, the stock market usually rises. Five years is the minimum time period I suggest, if you are to invest. Since the 1920s, the vast majority of five-year time periods have produced positive performance for the stock market. The current five-year period, however, is one of those rare negative performance times.

Since mid-2000 (four months before Bush II was elected), many stock mutual funds and market indexes (see chart) are down. During 2000, 2001 and 2002, the market slid dramatically. The market did well in 2003 and has been fairly steady since then. A year ago, the five-year performance figure included 1999, a great stock market performance year, but the manic late-1990s run-up no longer impacts the five-year history. Gradually, the relatively placid market of the last few years will replace the catastrophic early 2000s.

Many people started investing about five years ago, in early 2000. We had just survived Y2K, and there seemed to be nothing to stop the stock market's meteoric rise. After procrastinating for years, many people invested at the peak of the market and have not recouped their losses yet. In hindsight, it's easy to say that they should have put their money in the bank at 1 - 2% interest, but that was a time when you would be scoffed at if you only made 20% in the market.

Was that a good time to invest? In retrospect, no. I encouraged people to invest, but cautioned them not to become too aggressive or to mortgage their houses to invest. At the time, I wondered if my caution was wrong. Maybe this was a different era: it wasn't.

At the bottom of the market, no one wanted to invest. Everyone knows you are supposed to "buy low and sell high," but most people do the opposite. Some people sold out at the bottom and never received the benefit of the recovering market. Was that a good time to invest? In retrospect, yes. I encouraged people to invest thought there were few hopeful economic signs.

This brings us to today. Is now a good time to invest?

The London transit bombings are fresh in our memories and people are nervous that something similar or significantly worse could happen any day, any where. Among my clients, pessimism seems more pronounced than in the general population. We have little hope that the Bush Administration will change its arrogant, extremist policies that are alienating friends around the world while breeding new terrorists. At home, Bush's environmental record is disastrous and his "borrow and spend" philosophy is running up massive debts that threaten our future economic security.

Despite the current state of fear in the country, I believe that putting all of your money into the "safest" investment, whatever you think that is, is not

prudent. Investing in a well-diversified stock/bond portfolio that matches your risk/volatility comfort level is one of your best alternatives.

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© Copyright 2015 Bob Dreizler, Chartered Financial Consultant All rights reserved Registered Representative and Investment Advisory Representative, Protected Investors of America. Member FINRA/SIPC This website and Bob's Latest Commentary newsletter are for educational purposes only and are not intended to contain recommendations or solicit sales on any specific investment. Opinions expressed in my newsletters and this website do not necessarily reflect the views of any other organization mentioned. Registered for Securities in CA, AZ, CO, CT, NM, NV, NY, OR, TX, WA. If you are not from one of these states, we will not attempt to transact securities, or provide personalized investment advice unless and until we are licensed in your state or international jurisdiction.