Avoid Investing Inertia

When investors sit on the sidelines in fear of “missing out,” that may be precisely what they end up doing, says Allen Roth in last month’s Wall Street Journal.

Roth, founder of the financial planning firm WealthLogic, says “over the past several years, many people have come to me with cash-heavy portfolios,” citing a host of reasons including the pending election, global turmoil, and interest rates. According to Roth, however, this mindset is really a veiled attempt to time the market and these investors are “losing the fight against the most powerful force in the universe—inertia.” Roth advises clients to fight this tendency by building a portfolio that’s “betting on capitalism rather than against it. Cash is virtually certain to lose spending power while stocks and bonds will likely beat inflation in the long run.”

The problem, Roth argues, is that logic doesn’t always prevail. For skittish investors, therefore, he recommends entering the market slowly through dollar-cost-averaging (periodic and systematic purchases) because “time in the market is far more powerful than timing the market.”