New employer, new 401K
In light of the May 12 newsletter describing the difficult conditions of the current market and how to invest new dollars, what would be your recommendation to a person that has changed jobs and is starting a new 401K? Should he just start applying his monthly contributions allocated via TAA or SAA? Or should he hold cash until "the correction"? This money will not be utilized for 30 year or so. This person plans to use a risk profile of 10-15 at his current age of 35. I lean towards just starting DCA via TAA the monthly contributions now as no one can predict when a correction may occur. Would appreciate your thoughts.
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qlee · 08/06/2014 15:49:52
Since this person has a long time to go before retirement, how about using TAA now and then wait for some big corrections (something like 30%) and go all in using SAA and then switch back to TAA when it rises back 20% (bull market)?
Maybe there will be 5-6 times 30% or so corrections (once per 5 years?) in his 30 year investment horizon (before reaching 65). He can afford to do that for a few times before his retirement. I bet that can generate a big wealth if he has patience.
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The point of having a non-subjective methodology is to eliminate the guessing game of "how much higher" or "how much lower" the stock market can go. In the depths of a bear market, it is difficult to jump in as the the depth is unknown and the news so bleak.stever · 08/19/2014 07:09:37
Any strategy can look great depending upon the start and end point chosen. Going with an approach that has the best long term track record, that is agnostic as to how it got there (capable of using any sector), and allows for the numbers to work in your favor is an investment philosophy that will allow you to earn above average long term returns....while being able to sleep at night.
Strategic approaches, as a result of their diversification, are better than guessing, but a disciplined relative strength Tactical strategy that uses multiple high risk and low risk sectors, has the best chance of keeping you in the game through the ups and downs of the stock market.
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