What do I do now if I have cash?

Maybe you just received a windfall, or maybe you got nervous recently with the markets and decided to be safe and move all your funds to the money market. The next question is what now?

The first thing we recommend is to update your financial plan/retirement analysis. Are you on track to reach your goals? If you have been a diligent saver and don’t spend out of control, you may be able to reach your goals with a fixed rate of return on your money. If this is the case, there are many options available today which will pay a flat return.  These choices may be suitable for you.

Or maybe that is not enough for your plan or not enough for your expectations, so you eventually want to get back into the equity markets, but you’re not exactly sure how or when the right time is. I believe you have 2 options:

1.    Traditional Buy and Hold - dollar cost averaging. Buy on the dips. History tells us these levels may be attractive entry points. You are trying to get in low, maybe not “the” low. The risk here is that you may be catching a falling knife, which can be very painful. Such a plan involves continuous investment in securities regardless of fluctuation in price levels of such securities. An investor should consider their ability to continue purchasing through periods of low price levels. Such a plan does not assure a profit and does not protect against loss in declining markets.

2.    A strict Buy Discipline – using technical/quantitative analysis, wait in cash until we begin receiving buy indicators, which should occur as the market begins to turn up. If the trend is down and the train is coming down the tracks, step of the tracks and wait for the train to pass before stepping back on. Such analysis only provides buy/sell indicators based on market patterns. There is no guaranteed strategy to accurately time the market.

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