In today’s volatile global landscape, investors often grapple with the question of how to approach the market amidst geopolitical uncertainties. A recent conversation with a client highlighted this very dilemma and provided an opportunity to discuss the merits of different investment strategies.
A new client was moving a large sum of cash into a long-term investment position. Understandably, she asked whether it would be prudent to invest in the market gradually due to the current geopolitical uncertainties. This is a common concern, as unpredictable global events can significantly impact market volatility and investor confidence.
In response to the client’s question, I emphasized that adopting a gradual investment approach to pursue better long-term outcomes is essentially a form of market timing. Market timing involves making investment decisions based on predictions of market movements, which is something we generally seek to avoid. The reason for this is simple: market timing is notoriously difficult and often leads to suboptimal investment outcomes.
However, we also acknowledge the emotional aspect of investing. If taking a gradual approach to entering the market would provide the client with greater confidence, then it is certainly a viable option. Emotional comfort is an important factor in investment decisions, as it can help investors stay committed to their long-term financial goals.
Ultimately, the key takeaway is that while we aim to avoid market timing, it is crucial to consider the emotional well-being of our clients. Taking a gradual approach to getting into the market, if it helps alleviate concerns, is far better than not investing at all.
Securities and advisory services offered through LPL Financial, a registered investment advisor, Member FINRA/ SIPC.
This is a hypothetical situation based on real life examples. Names and circumstances have been changed. The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investments or strategies may be appropriate for you, consult your advisor prior to investing.