Broker Check

Invest Now or Wait For a Better Entry Point?

December 15, 2020

With the Presidential Election behind us, many clients may be wondering whether now is a good time to invest their excess cash. 

The stock market has rallied from that point with the uncertainty and anticipation removed, and many of the events of 2020 are behind us.  For clients sitting on cash, it raises a choice between paying a higher price tag to invest after these recent gains or waiting for a better entry point following a selloff.

There is no black and white decision to determine whether it’s best to invest now, next month, or next year.  It is impossible to predict the direction of the market in the short term.  Timing the market has often been described as a “fool’s errand.”  What is more important is your time spent in the market.

Looking back purely at stock market returns in 2020 highlights the case to spend your time in the market. Investors who sold their stocks and stock funds following the pandemic-induced market crash in March and chose not to reinvest likely missed out on much of the subsequent market gains (and ultimately gains for the year).

Here at IM Wealth Partners, we work with each client directly to develop an asset allocation plan.  We determine the appropriate plan and agree together to implement it.  If you have raised cash from the sale of a business, an inheritance, or even just accumulated additional cash over time, we recommend that you put this cash to work as your plan suggests.  Trying to time the entry point into the market or anticipating the next market correction is not the best course of action.

According to your plan, as your fiduciary, we are confident to begin investing your extra cash in the markets today.  We are happy to work with you on an investing approach that may allow you to invest your cash over a specific period, such as a monthly plan or another methodical manner.  Let’s work together on what makes you feel the most comfortable.

Once your money is put to work, you should expect some volatility. It is an often-unavoidable aspect of investing.  Some of the greatest investors have never been able to time a market bottom or a correction and are inevitably down at some point.  It’s best to avoid the short-term market fluctuations and focus on the stronger, long-term compounding effects of the stock market.

With many of the events, tragedies, and other headline news of 2020 mostly behind us, there are plenty of positive things that may support the stock markets in the future.  Yes, the coronavirus is still with us, but several vaccines are quickly becoming available.  Such vaccines may allow economic activity to return to a more normal level. Recent talks in Congress of another round of stimulus may serve to bolster consumers and small businesses.  Another monetary response from the Federal Reserve may only help the case.

If you would like to discuss investing your extra cash, please do not hesitate to contact us. We have a great team of people who are available to help you!