Time to Hurry up and Wait? - 2/9/13

In this week's edition:  The market's up, should I invest now? Is this email not displaying correctly? View it in your browser.

Time to Hurry Up and Wait? This weeks' newsletter emerges from a client submitted question: 'Given the current market valuations I'm agreeable to waiting a short while to purchase equities if you feel a delay would be beneficial ..and prudent.  Thanks for your help,' GB in NC G,   This is a great question.  After stocks world wide have neared all time highs - how can anyone watching not wonder if a better buying opportunity will come soon?   Since the rise in stock prices beginning March 2009, a spread of about 8% became commonplace.  For example, the DOW would break out over 10,000 and go up to 10,800 or so...and then it would go back down, and then back up, etc., between those two points before breaking out 8% higher or lower later on.       Though I've yet to hear anyone claim profit success on this, in hindsight it should have been a market timer's paradise.  More important than this though, was money continued to pourout of stocks even as prices were dramatically rising.  Most of this money went into cash, bonds, and gold.     Money flowing to "safety" during a scary and uncertain period, while imprudent, could be considered logical.  The market going up all the while, however, is illogical.  All I can say about that is it's illustrative of the natural state of the market: Illogical and Unpredictable.       My most poignant observation regarding your question started last November.  At that time, monthly inflows into the stock market eclipsed outflows for the first time since 2008.  I can't help but notice as traders began taking profits over the last several months the market hasn't shot back down, which would be the logical market response.   The obvious explanation for this (though not necessarily correlated given the natural state of the market and all...) is that more money continues to go in than is coming out, even from the profit takers.  For the last two weeks major indices have been trading within a tight range.   In investing this is referred to as "coiling."  The reference relates to the analogy of a spring.  The tighter it is compacted the more energy is stored within the coils.     The cool thing about a compacting spring is that we know it is going to unwind at some point.  The not so cool thing is that we don't know when, we don't know how much, and since the spring is suspended in a weightless vacuum, we don't know which direction the thing will let loose.     So this is what I have to go on:  more money is going into stocks - there is far more money in cash, bonds and gold than ever before - the stock market appears to be less scary and the only option making money presently - and, most importantly, the market is always impossible to predict in the short term, even in the face of dramatically suggestive evidence.   During times like this I fall back on the academic adage, "Now is always the best time to invest."  That doesn't mean that prices won't be lower next month.  What it means is the most successful investors tend to worry less about the day their dollar goes in and more about how quickly they can put capital to work.     I invest every month.  I know where the market closes virtually everyday. Like you, I contemplate potential benefits by waiting.  But I do not deviate from getting my money in when available, because I also know 2 years from now I won't remember where the market closed today.   A substantial part of my return will come from interest and dividends I earn over time, regardless of inevitable market fluctuations.  This is one reason the most important aspect of return is the total time invested, not the entry point.  Therefore, the most prudent thing for me to do is to invest now.     As always, I welcome your questions and comments.   Marc Becker, AIF Managing Partner, Wiser Financial Coaching Columnist, The Advisor Sherpa  becker@wiserfinancial.com To read past articles and view past videos, visit: www.marcbecker.tv