Think about this.
Stocks tumbled Friday on worries about the government taking a bigger chunk of Citigroup and a bleak reading on the economy, again touching 12-year lows. (source)
As Wall Street slides towards a 12-year low, it’s almost like getting back 12 years on your financial clock - and a great opportunity to get to all the investing that you have been planning and procrastinating and planning and procrastinating … but never really doing anything about it.
This especially applies to people like me, who, just a few years ago, procrastinated much without actively investing, and thought that they missed the bus on making big bucks in the stock market.
The cash percentage in this portfolio will give you an idea of what I am talking about.
I now have a chance to invest some of that cash 12 years ago - with valuable diversification lessons from the past couple of years.
Well… what happens if we hit 24-year lows?
For people like me, that would be an unprecedented opportunity - assuming you believe that markets will have to go up sometime in the future. The time-frame over which this happens is not really predictable, but one can’t stay eternally pessimistic, you know.
Way forward: I am thinking dollar cost averaging and some key ETFs (having a healthy volume).
I have had doubts about dollar cost averaging in the past; but given the current situation, I have sort of started appreciating the value of investing that way - small steps at a time. Of course, the gains are small and slow, but so are the consequences of failure. I bet the slow and steady are surviving this crisis a lot better than the fast and furious.
ETFs (by their very nature) mitigate the risk of losing a bunch of money on individual company bankruptcies, but they have their own pitfalls - read this to understand how ETFs have the potential to put you in a hole if you are not careful.