Should I Go to Cash and Wait Until the Market Bottoms Out?

October 07, 2022

Should you go to cash and wait until the market bottoms out? We go over why this may not be the best strategy for long-term investors in this week's Arista Advice.

Full Transcript:

Hello, welcome to Arista Advice! Question of the week is: "Paul, should I go to cash and wait until the market bottoms out?" It's a very realistic question that many may have internalized, but just haven't called and asked us, but today, a client did.

So I wanted to share our thoughts and some insight that we shared with him. Number one - the market is uncertain right now The market is behaving as if we're at war and that a lot of bad things have happened in the economy when in fact, there's been no bankruptcies, no bank closures, no radical changes in the monetary or fiscal policies, but just a lot of nervous people about a potential recession that could be coming our way.

We know that time and time again we learn that time in the market outperforms those who try to time the market. Being in the market is the best place to be for long-term investors if your time horizon is 10 years or longer. If it's less than 10 years, you then want to have a little less in the equity market, maybe more over in CDs and some bonds. A recent study by JP Morgan Asset Management found that seven out of the ten best market days since 2022, have been within two weeks of the 10 worst days. So whenever a bad day happens, shortly thereafter, it is preceded by a good day. Thus, it's always best to stay in the market and absorb the ups and the downs to the best of your ability, and what's most appropriate, and what you determine is best with you and your professionals, and then allow the market to work for you instead of you working against it and trying to time it and trying to beat it. Research shows that those that do, they are unsuccessful.

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