My friend sent me an article the other day which really summarized my thoughts succinctly – he sent me this piece from Evan Newmark writing at the Wall Street Journal. If you haven’t noticed the crazy action in the stock market in recent weeks and days, let me be the bearer of bad news: the major US indicators are down from their yearly peaks. You’ve probably lost some money on paper, even. Between oil in the Gulf, the Greece Drama, and even North Korea, there is a lot to be worried about. Here’s the thing – these are all known unknowns, and generally priced into the stock market already.
Read the rest of this entry »Market Timers Agree: Buy Stock
On January - 7 - 2010
What should you make about the Mark Hulbert article claiming that top market timing newsletters are bullish heading into the new year? After a 27.76% increase in the value of the S&P 500 (not counting dividends) in 2009, how much further does the stock market yet have to run? And what does a bullish consensus among market timers mean, exactly?
Read the rest of this entry »So, The Stock Market Is Up?
On November - 10 - 2009
Or is it? The Dow Jones Industrial Average increased 2.03% yesterday, on the surface a nice gain for the index. Rises such as that give confidence to investors that the worst is over and it’s time to work back into stocks. Let me briefly present the other side of that argument.
Read the rest of this entry »Predicting Recession?
On October - 13 - 2009
How accurately can the stock market (as modeled by the S&P 500 Index) predict future recessions? If one charts the S&P 500 over the years and marks when recessions begin, is there any indication that the market senses it early? How accurate are the predictions? Can the market be used to prepare for downfalls? In short: somewhat, yes, very, probably not.
Read the rest of this entry »The Failure of Dollar Cost Averaging
On July - 6 - 2009
Dollar Cost Averaging (DCA) is touted by some financial planners as the solution to all of investing’s problems. By continuing to invest money at a regular interval, you buy more shares when prices are low and more shares when prices are high. Additionally, dollar cost averaging fits the general schedule of how people normally get paid – every two weeks you get your paycheck, and you also automatically invest in your 401(k), for example.
That’s great… for predictable streams of income. This article will *not* try to convince you to stop your normal recurring investments. However, dollar cost averaging meets its match when introduced to a windfall. When you have extra funds, you shouldn’t tiptoe into the market, you should dive right in with a lump sum investment. Don’t believe me? Let me convince you…
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