Should I Jump In This Far Into the Rally?

I received a letter over the weekend from a reader who had the following question:


“Due to market turbulence, I didn’t want to get in on the big rally that has taken place.  Is now a good time?”


My normal disclaimer would be, “I’m not a market expert so don’t listen to me for advice.”  In recent months, even the experts have made their fair share of bad calls so in the end, you have to decide for yourself but my answer would be to wait for a pullback.  Most people agree that markets are now overbought and it isn’t going to take much negative news to cause at least a small sell off as investors take profits.  Further, if we are to believe that the market volatility is here to stay for at least the short term, there will most likely be a more attractive buy level that shows itself in the not so distant future.  After that, you have to decide if you think the market will continue to go down or if it is just a short fall in an otherwise rising market.


How do you decide?  Please don’t just guess.  Do as much research as you can to come up with an educated opinion.  I don’t think that anybody is going to get it right all of the time and if you invest correctly, you won’t have to.  Buy as the market continues to drop and sell as it goes up but not all at once.  Buy and sell in increments and you won’t have to worry about calling the market with perfection.  How many people invest in a way that puts them in a position where they have to call it perfectly?

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