Stop trying to time the market

The questions that I get asked often are:
1. “What should I invest my money in?”
2. “I feel like the current market is overpriced. When should I start investing?”

Well, I’ve got some answers for you.

This is a post that I’ve been working on for some time now, but I’ve decided to  publish it since it seems like the appropriate day to do so for what the market did today. I’m sure you got a handful of investment advice from your coworkers who are trying to time the market. (Ignore them, and do your own research).

Now, if you’re like me and have read dozens of books on economics and finance, you probably know already that paying attention to the daily fluctuations of the market is just noise and should never alter the way you invest, and you likely already have an aggressive investment portfolio optimized for the long-term. If you’re that person, you can stop reading now and go do whatever you love to do on Monday nights.

Still reading? Ok, I’ll give you the answers first because I’m in a bit of a time crunch now, and will delve into the topic further in future posts.

“What should I invest in?”
Most of your assets should be invested in an index fund that tracks the performance of the U.S. stock market.

“When should I start investing?”
Don’t try to time the market. The best time to start investing is whenever you have the money to invest. This means that you are debt-free, or have at least paid off your high-interest loans (with annual interest rates over 5%), and have enough cash to handle life’s emergencies, such as a broken car, an unexpected medical diagnosis, or a job loss. Keep investing no matter what the market does. When the market takes a big hit like it did today, invest. When the market is quickly rising like it did all of last year, invest. If it completely tanks like it did in 2008, invest. Get it? It’s simple: whenever you have the money to invest (which should be every single time you get paid), invest.

Next: Why Invest?

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Shin Adachi

I am a pianist and composer. I am also a software engineer at Google, and some people call that my "real job". I am originally from Tokyo, and now based in Los Angeles. Check out my music on iTunes/Spotify! Just search for my name.

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