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Money February 2018

Financial Fortitude

How to Get Back into the Market

By Karen Telleen-Lawton

Just like taking a shopping list for the grocery market, you need a plan for the stock market, and the discipline to stick with it. Don’t go to grocery shopping when you’re hungry, and don’t trade stocks when you’re panicking.

Whether you’re a market player or a buy-and-holder, the stock market surely has been quixotic. The bull market has roared blithely through its ninth year despite the vicissitudes of the news. The rally – if still present at press time – is the second-longest period on record without at least a 20 percent drop in the S&P 500.

Many well-meaning investors pulled out of the market a year or more ago. Now they’re sitting on the sidelines, having missed another banner year. The S&P 500 was up over 17% for 2017 while the Dow Jones Industrial Average was up over 22%. Market watchers quip that this reflected strong corporate earnings and the anticipation of a massive tax cut.

If you’re in the position of having left the market, how long should you stay out? How long can you wait for the inevitable correction? The answer is a resounding, “it depends.”

The majority of us seniors need to be in the market to meet our financial goals over our lifetimes. We need to participate in economic growth to counter the other inevitability of inflation. Successful market timers can be named on one hand; the rest of us will be successful by being there in the long run.

How do you get back in? Do-it-yourselfers need to decide how much to commit, what to leap into, and when to make the leap. The next correction may be today or it could be months or years away.

The average business cycle is about six years: five years of expansion followed by a year of contraction, according to Investopedia. Given this, it is important to keep liquid any funds you may need over the next business cycle. Your emergency fund, a cycle of retirement living expenses, and any potential big ticket items like remodel, education or weddings in the next six years shouldn’t be in the market.

You can lower your timing risk by investing over a period of time. The period depends on your comfort level – it could range from a quarter of your investable funds each week for a month, to a tenth each month for ten months. Resolve to start now, regardless of today’s political or economic news.

What should you invest in? The most important decision is the asset allocation that’s appropriate for you and your family’s needs. Articles such as this CNN guide ( can help you determine the right mix of large company equity (large cap), small cap, and international ETFs. The web has made it easy to be our own brokers, which is surely a blessing and a curse. Likewise, the proliferation of exchange-traded mutual funds (ETFs) has made it easier for the do-it-yourselfer to find good passive investments without the stress of trying to beat the market.

Schwab and Vanguard are the leaders in providing this type of broad market coverage with low fees. Using their passive market index ETFs, you can diversify your investments while keeping your costs much lower than if they were professionally managed. A good resource for researching ETFs is

Here are a few to get you started:

Large cap: SCHG, VUG

Small cap: SCHA, VIOO

International: SCHF, VEU,VT.

Round out your allocation with the appropriate mix of fixed income and cash, and you’ve got a plan. Then, instead of obsessing over when might be the next crash or rally, systematically adjust your portfolio a few times a year to rebalance back to your agreed upon asset allocation. Over time, this strategy forces you to sell high and buy low.

Is there a situation when you should just stay out of the market? If you are close to or in retirement and have felt comfortable being out of the market, it’s worth checking out. You can crunch the numbers with a financial advisor to estimate whether you’ve saved enough to last your projected lifetime.

Nevertheless, if you expect to live a couple of decades or more, you likely require the expected return of the market to keep up with long-term inflation, especially the medical costs that come with growing older. Then you might pick a ratio of equity to fixed income that matches your need and risk tolerance, and, as above, stick with it.

Just like taking a shopping list for the grocery market, you need a plan for the stock market, and the discipline to stick with it. Don’t go to grocery shopping when you’re hungry, and don’t trade stocks when you’re panicking. Binge shoppers especially should see a fee-only financial advisor.


Karen Telleen-Lawton is grateful to serve seniors  and pre-seniors as the Principal of Decisive Path Fee-Only Financial Advisory in Santa Barbara, California ( You can reach her with your financial planning questions or Gratitudes comments at  This email address is being protected from spambots. You need JavaScript enabled to view it. .

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