When the Going Gets Tough
When the market is in a downturn and worries of a recession loom, many investors are cautious. Rightfully so, if we think an investment will lose money we won’t want to invest in it, plain and simple.
The impetus behind Tater, and my personal investing goals, are based on long term returns. We don’t try and time the market, we ride with it and minimize risk and drawdowns with carefully thought out and tested methodologies. Therefore, even if we think the investment may lose value in the short term that is immaterial, because we know it will increase over the long haul. So a short term dip is essentially irrelevant, we just have to be headstrong.
If you’re just sitting on extra uninvested capital, then you are already losing money, especially in times of excess inflation, like right now. Inanimate capital is losing it’s purchasing power incrementally each day.
If you’re still wary of investing your cash, consider a high interest savings account. Here is a helpful link to an article with several good ones:
https://www.highinterestsavings.ca/chart/?fbclid=IwAR2qYTapkWG99XVqiSaUsNscIobc9SjL-6THHTr00MQSbfmFwFnZRRp1CCE
Is your cash sitting in a registered account? No problem, you’ve got several different high interest savings account ETFs to choose from. Check out this (wealth)awesome article:
https://wealthawesome.com/best-high-interest-savings-account-etfs-in-canada/
Just be warned, if you’re holding off on investing in the stock or bond market because you think its going to lose money, that’s likely not a winning strategy. Timing the market perfectly is impossible, and history has shown that investors who ‘get in’ when they have the money to invest, rather than waiting for a better time that may not come, generally achieve better results in the long run.
Of course, if you have a large sum of money to invest, it can be stressful putting it all in at one time. There is a technique called dollar cost averaging, which describes the technique of investing smaller amounts of capital at specific intervals. This would be done so regardless of the price (of the ETF) at the time of investment. Committing to specific intervals is important as it removes emotion from the buying process. This method can reduce the average cost per share, but history has shown that the stock and bond markets go up over time (that’s why we invest in them after all) so investors are usually better off investing all of the money at one time, as soon as they can. Despite this knowledge, it is important to remember that we are all human beings, and emotion is a real factor when it comes to investing. If dollar cost averaging or holding on to some extra cash (in a high interest savings account or ETF) helps you sleep better at night, then it can be worth it.
