If you’re looking at the markets, and your instinct is to run screaming, let’s all remember 2008. I know I am.
In December of that dreadful year, my husband and I were shopping at a car dealership. On TV, a huge graphic showed the Dow plummeting more than 600 points.
“Look at the market!” my husband said, in shock.
“This could be a sign that it’s time to buy,” I replied.
And buy we did. A car, that is. We didn’t even remotely consider buying into the stock market—it felt way too scary. But now, I look back and kick myself: even with the recent plunge, the Dow is up more than 30% since then.
And therein lies one of the most counterintuitive pearls of investing wisdom: Often the best time to invest—i.e. when the market pulls back—is when it feels the worst.
Which brings us to dollar cost averaging. You know what it is—making regular, fixed investments over time. Part of the value of this strategy is that it forces you to keep buying, even when it looks like you should hide your money under a rock.
Payoff: By sticking to a steady long-term strategy, you reduce the impact of your own emotional reactions.
True, pulling back right now might feel good. It might make you feel safer, smarter (“Phew, dodged that bullet”). But remember 2008. Yes, the market will dip now, and it will rally yet again—and you have to be in it to win those gains.
Dip In: Are you buying during this market downturn?