Investing Basics: It’s hard to time the market, but you can time your contributions

Investing Basics: It’s hard to time the market, but you can time your contributions
Eileen St. Pierre, The Everyday Financial Planner

time to saveMy husband and I thought it was the right time to make another IRA contribution. Since we are self-employed, it is hard for us to practice dollar-cost averaging, but we do try to spread out our IRA contributions throughout the year. This time around, we were able to use the news of the United Kingdom’s decision on Thursday June 23 to leave the European Union (Brexit) to our advantage.

We awoke Friday June 24 with news on the radio that international stock markets and S&P 500 index futures had suffered steep losses and the U.S. stock market was expected to follow suit when it opened in a few hours. Sure enough, we watched the losses grow throughout the day. So we decided to deposit our retirement contribution that day into three different stock funds, getting some nice discounts (3.4% to 6.7%). We had originally planned to wait a little longer to make our contribution, but sped up our decision in light of market movements.

Since we are long-term investors, short-term volatility does not concern us. But I know it’s hard for many to stomach.  If you want your portfolio to grow enough to provide a secure retirement, you need to invest in stocks and thus learn to accept short-term volatility.

Over the long-run, trying to time the market for the best time to trade securities is a waste of time. It does not work consistently. Yeah, you may get lucky once in a while. But if you are considering a trade anyway, pay attention to what’s currently happening in the markets. Watch Nightly Business Report on PBS to get unbiased information. Changing your trade date by a day or two can pay off. It did for us on Friday, June 24. But don’t get obsessed with it. What’s important is that we made our retirement contribution.