A Buying Opportunity?

[LDAHL]

The last week or so has been one of those periods that make capitalism so interesting. China sneezes, and commodities, the Yuan and emerging markets catch cold. Greece signs bailout number three, the Prime Minister decides to move out and the Germans pick up a few nice airports at the garage sale. The Dow is down 450 points a half hour before the market closes. The usual crop of blowhards come out of the woodwork to insist they saw it all coming. Greed is stepping out of fear’s way.

Bearing in mind the old aphorism that bear markets return stocks to their rightful owners, I’m tempted to put some money into equities about a month in advance of my normal portfolio rebalancing. What do you think?

[Rogar]

I'm generally one to stay the course and not try to outguess the market. My annual rebalancing lately has been from stocks to fixed incomes since stocks have had the run up and growth in my fixed has been static. If you are a month from rebalancing into stocks as part of your plan, it might make some sense not to wait as a month might not be very significant in the long run.

[SteveinMN]

Some money I would agree with. Market timing, no.

I'm treating this recent dip as a correction. The valuation of equities is based on emotion almost as much as fact. Company stocks get pummeled when the company's quarterly results are great but not what Wall Street predicted. And the market is very uneasy with change -- in either direction.

The U.S. market hasn't had a correction in about four years. While I think business and the government (yeah, I know, almost one and the same) play fast and loose with metrics like job growth and the unemployment rate, I sense that people feel more comfortable about their financial outlook. China's economy may be slowing down, but I don't think it's stopping and there still are lots of people in lots of countries who want to buy TVs and cars and the like and China is a prime supplier of all of them. I even think that this may slow down the U.S. Fed in imposing higher interest rates for fear of further spooking the market.

None of us has a crystal ball. But tossing some money into this market a little early is a bet I would make.

[oldhat]

My whole approach to investing is based on the truism that nobody beats the market in the long run (that, and diversification). Therefore, market timing is out.

I must admit that there was one time when I should have violated my own rule. When the market was bottoming out at the height of the financial crisis,
Warren Buffett published an op-ed in the NYT with the headline, "Buy American--I Am." I thought at the time he was probably right, that the market had nowhere to go but up. I had some cash and should have followed my instincts, but I didn't, and I still feel a twinge of regret when I think about.

I don't think the current situation is comparable, though. It's likely that there will continue to be downward pressure on stock prices, particularly as the Fed starts to raise rates. It seems clear that the run-up of the past few years was at least partly due to the availability of so much cheap money. This had to end, and things will likely be on a downward trend or flat for a while.

Maybe. That's the thing--you never know. That's why you establish a discipline and stick to it.

[bae]

I don't market time.

However, I do use downturns to harvest losses for tax purposes.

[kib]

Oh Leonard, if only you'd been observing me. I dumped a huge wad of cash into the market about six months ago after being out of it for decades. Since that time, my piddly but adequate earnings has shifted from covering my bills to negative earnings every month. In other words, the total of my income is less than the loss of my funds, I have to ding my net worth to pay the bills. While I didn't see it coming, surely anyone else who knows my track record would have. ... it seemed like a good idea at the time.