Investing in a Bull Market

Larry is from Texas, he’s been in the business eleven years and he is managing just a shade under $100 million. Larry’s question was:

The market’s been up four years, without a correction. What do you say when people comment that maybe the market’s too high?

Listen to the audio podcast or read the transcript to learn Don’s suggestion on addressing such a comment from clients.

I try to just get away from the whole issue of the market being too high. Here’s how.

When I do public seminars or talk to people one-on-one, I ask them the biggest single mistake they made in investing. The answer every single time is – I didn’t start soon enough.

So I just tell people, there’s never a convenient time to invest, there never will be. I don’t allow my clients to buy at the top of the market or at the low of the market. We dollar cost average.

By doing that, the market is never too high or too low as we have the money we invest. The time to invest is when you HAVE the money.

I think clients are looking for reasons not to buy.

It’s not fun to save money. It’s more fun to spend money. So when we call trying to really sell somebody a yes, they’re trying to sell us a no.

A lot of times it involves a date. I can’t invest now – it’s tax time. I can’t invest now – the holidays are coming. Call me after the holidays. Call me after school is out. I just explain that it’s never convenient and I can’t tell you how fast time is going to go by, you won’t believe it!

But you have to say – you and your family are the most important people you know. If you don’t start now, you’re dead.

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I explain to somebody, if they’re forty-five years old, and want to retire at age sixty-five, and they get paid once a month, they’ve only got 240 pay checks left in their life, and it’s over.

Somebody’s goal is to send their child to college, I say – Look, in 180 months, a 3-year old is going to be in college. Now the market’s too high, the market’s too low, rates are too high, rates are too low. This is not even relevant if we’re dollar cost averaging.

But I can go back and give reasons not to buy as far back as the Korean war and Eisenhower’s heart attack in the ’50s, and the Kennedy situation in the ’60s, and the stock market crash in the ’70s.

When I started in this business the market was just a shade over 600.  It’s currently hovering around 18,000.  And believe me it’s been too high ever since I’ve been in the business. It’s always going to be too high. I think even our children’s children are going to say “well, the market’s too high”. So what I try to do is convince them that’s not the issue.

The time to invest is now that you have the money.

I appreciate the fact you’re looking for reasons not to invest.  It’s not fun to save, but when we’re sixty-five, the milkman doesn’t care what our problems are, the bank doesn’t care. We’ve got to get started.

I tell them, investing money is like taking a shower. We’re not going to plunge in, we’re going to turn the water on, put our hand in, and get in slowly.

I explain what dollar cost averaging is. I think that by doing that the top of the market becomes irrelevant.

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