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January 22, 2008

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Hey that's great. When exactly are you planning on pulling your money out? Will you pull it out all at once or little by little? What happens if you're 60 with five years to retire and the market tanks like it just did?

What will you do then?

I agree. The market will bounce back at some point. With my sights set on 40+ years out, its like one big gigantic fire sale.

Now or at least soon will be a very good time for leveraging your money in the market. This is a step that a lot of people do not use (or know about), but can be very powerful.

Infact I should write an article on it, stay tuned.

Tom --

As I get older (and closer to retirement), I'll start moving a larger percentage of my assets into more stable investments (such as bonds.) But since I have 20 years until then, I think I'm ok for now. ;-)

I'm curious why this type of timing seems to get mostly positive feedback, when the earlier [http://www.freemoneyfinance.com/2008/01/keep-investing.html] question from a reader about timing gets mostly negative feedback. Shouldn't everyone arguing against market timing already have ALL of their available money invested in the market? If not, why tell someone else that they should?

I favor buying more now, but I also favor other types of timing, as long as you can see the big picture. I try to treat all assets consistently. I held off on some Roth contributions during the end of 2007 because of what I saw in the markets. Now I'm putting those in and looking at what to do with 2008 contributions. I'm not claiming to beat the market, or that I know what will happen, but I am comfortable acting based on how I assess and plan for risks.

I dollar-cost-average into index funds and have a small portfolio of individual shares. I do keep a siginificant chunk of cash in hand so if opportunities arise(such as a drop in the markets), I can dollar-cost-avg a little extra. I agree marktet-timing is like betting on horses. Investing all depends on time horizon, risk tolerance, and cash-flow.

Planner --

In my case, I used money set aside for something else (house downpayment) taht I decided to shift over, so it really wasn't available for investing until I decided to reallocate.

FMF,

Are those going to be AAA bonds backed by mortgages or corporate bonds rated AAA or maybe Bond funds?

just curious.

Tom

Tom --

I'm yet to figure that out. I'll let you know in 15 years. ;-)

"Shouldn't everyone arguing against market timing already have ALL of their available money invested in the market? If not, why tell someone else that they should?"

I earn new money that I can save about twice every month, so I do have all of my availible money invested in the market, and I also will be buying all the way down. And all the way up. And all the way back down again. Etc. The big mistake would be for me to start trying to time the market by "waiting until the market recovers" to invest my regular bimonthly savings allocations.

It is amazing to me that people forget the dot bomb of 2000. It took a long time for the Dow to recover and the Nas still has not recovered. Market timing certainly would have been a beneficial move then methinks.

It's easy to sell at the market top than to buy at the market bottom. Even Buffett can't do that, let alone the small investors.

Don't let the market movement ruin our investment plan. All smart investors should keep dollar cost averaging like a machine.

yep, that is exactly what Wall Street wants you to do.

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