By Craig Erwin, Ph.D.
Ignore those telling you to wait to invest. I was reading Barron’s, a highly regarded financial newspaper, when I saw the following quote attributed to Meryl Whitmer, General Partner at Eagle Capital Partners in New York, “People should have cash in reserve, and maybe they’ll get another opportunity to buy stocks more cheaply, as happened…last year.”I have been tracking Meryl Whitmer’s advice for years. She’s very bright, with many years of experience on Wall Street, but I think the advice she gave may do more harm than good for many people. It’s the sort of advice that might be good for a hedge fund manager, but not so helpful for regular folks.
What’s wrong with Whitmer’s advice? If most of us wait until conditions are right (e.g., the economy is in good shape, the political situation is stable, stocks are cheap), we will never invest any money. We will wait forever because conditions are never perfect. We will always find some cause for concern that will convince us that it is best to wait until the future is clearer or a thorny issue is resolved. If we wait until stocks are cheap, the news will be so disturbing that we will be too terrified to invest.
Behavioral finance/economics gets in the way of doing what we should. Just because it makes sense to do something doesn’t mean we will have the courage to do it. Researchers have found that most of us need a nudge to push us to do the things we should be doing anyway, like saving and investing. Many of us will never get started without a nudge from the government or an employer.
I have a friend who is always sitting on the sideline waiting for stocks to get cheaper so he can buy stocks and dive feet-first into the market. He has missed the opportunity to earn good returns on his investment portfolio because he is rarely invested. He has failed to take advantage of dollar-cost averaging, a powerful tool that we can all use. Click this link to learn about it. https://womenretire.com/the-best-way-for-most-of-us-to…/Instead of seeing his money grow, my friend saw it stagnate because he was too hesitant to jump into the stock market and stay in. And there are millions like him. When he compares his performance to that of others, he is almost always jealous.
The moral of this story is that you must not wait until stocks are cheaper or conditions are better to start investing. Don’t wait another day. If you wait, you risk never taking advantage of the wealth accumulation opportunities provided by the stock market, because you might wait forever. Some wait until their children grow up so they have more disposable income. Some wait until they reach their forties or fifties and retirement starts bearing down on them. But the key to successful wealth accumulation is to start as early as possible and to save as much as possible for as long as possible.
So, get started now. Sign up for your workplace retirement savings plan or open an Individual Retirement Account (IRA) and start saving regularly and automatically. Invest the money in a stock index fund. It will be the smartest thing you’ve ever done.
For more information on what to do to prepare for retirement, click on the following links:
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