When Is the Perfect Time to Invest?
Trying to time the market rarely works out well. Instead, be sure to have enough cash on hand to cover you in good times and bad.

While I never have seen a survey inquiring about the desire for investing at the perfect time, I am pretty confident that the resounding response to such a question would be, "Yes! I would like it if I could identify the perfect time to invest." At the same time, isn't that desire for certainty exactly what all the scam artists use to defraud investors? They come along with their great-sounding ideas about how this is the perfect time or the worst time to invest and offer you a strategy to take advantage of that situation—that happens to make them, not you, rich.
Of course, given a choice of being right or wrong, we all want to be right! At the same time, there are so many ideas that sound right, but evidence proves them wrong. For example, market timing sounds good, but seldom works out. Yes, people do get lucky from time to time, but mostly, they get it wrong. Why? Their emotions get in the way. Yep, those old emotions of fear and greed.
Take Fred and Sally. Our hypothetical couple were excellent savers and had amassed a nice sum of $2 million. In the crash of 2008, Fred and Sally couldn't stand seeing their hard-earned savings decline. When their portfolio was down to $1.2 million, they got scared and decided to pull the plug. That was March of 2009—exactly the worst time to flee the market because it bottomed out at that month.

Sign up for Kiplinger’s Free E-Newsletters
Profit and prosper with the best of expert advice on investing, taxes, retirement, personal finance and more - straight to your e-mail.
Profit and prosper with the best of expert advice - straight to your e-mail.
Of course, they now thought that they had seen all the signs: high home prices, Standard & Poor's 500-stock index at record highs, valuations expensive. How could they have seen all that and not pulled the plug earlier? The truth is they hadn't seen the signs until it was too late to act on them. Few, if any, had seen them, and if they had, they pulled out way too soon and then didn't get back in at the bottom like they said they would.
A better strategy for Fred and Sally would have been to ensure their portfolio could actually be held for the long term instead of feeling forced out due to fear. Having adequate cash reserves is a key component to retirement success. Too often investors get swayed by the notion that they do not earn enough on the cash portion of their portfolio. Of course, on the surface, this is true. Cash never earns as much in the long term as other asset classes do. Never! At the same time, that is not what cash reserves are designed to do.
We suggest that retirees have enough cash in reserve to cover their expenses for 18 months to 24 months. When the market goes down, this will be an important resource to draw upon during the tough times. In most cases, the markets recover in 12 months to 24 months, allowing your capital to provide the returns that are necessary to meet long-term needs and hedge against inflation.
What if your retirement projections aren't as attractive when you're holding that much cash? That may be a signal that you're not ready for retirement yet or that you need to adjust your expectations for cash withdrawals from the portfolio. Most people are not able to meet a retirement need that may last 30 years plus without investments beyond fixed income. At the same time, few retirees can successfully navigate having their portfolio 100% invested and the ups and downs of the markets, emotionally or practically.
There are four key factors to successful investing:
- Valuations
- Costs
- Volatility
- Tax Effectiveness
By focusing on the four items above and having adequate cash reserves to meet short-term needs, regardless of market conditions, your probabilities of success increase significantly.
Bob Klosterman, CFP, is the Chief Executive Officer and Chief Investment Officer of White Oaks Investment Management, Inc., and author of the book, The Four Horsemen of the Investor’s Apocalypse.
Get Kiplinger Today newsletter — free
Profit and prosper with the best of Kiplinger's advice on investing, taxes, retirement, personal finance and much more. Delivered daily. Enter your email in the box and click Sign Me Up.
Robert Klosterman, CFP® is the CEO and Chief Investment Officer of White Oaks Investment Management, Inc., a fee-only investment management and wealth advisory firm. Bob is the author of the book, "The Four Horsemen of the Investor's Apocalypse. White Oaks has been recognized by CNBC.com as one of the "Top 100 Fee-Only Wealth Management firms in the country.
-
RMD Deadline April 1: Five Tax Strategies to Manage Your 2025 Income
Taxable Income The April 1, 2025, deadline for required minimum distributions (RMDs) is fast approaching for retirees who turned 73 in 2024.
By Kelley R. Taylor Published
-
Rising AI Demand Stokes Undersea Investments
The Kiplinger Letter As demand soars for AI, there’s a need to transport huge amounts of data across oceans. Tech giants have big plans for new submarine cables, including the longest ever.
By John Miley Published
-
The Three Biggest Fears Keeping Retirees Up at Night
Here are the steps you can take to put those fears to rest and retire with confidence so you can relax and enjoy the life you've planned.
By Pam Krueger Published
-
What Can a Donor-Advised Fund Do for You? (A Lot)
DAFs and private foundations go about helping charities (and those who donate) in different ways. Each comes with its own benefits and restrictions to navigate.
By Julia Chu Published
-
Estate Planning When You Have International Assets
Estate planning gets tricky when you have assets and/or beneficiaries outside the U.S. To avoid costly inheritance mistakes, it pays to understand the basics.
By Kelsey M. Simasko, Esq. Published
-
Three Essential Estate Planning Steps to Protect Your Nest Egg
After dedicating years to building your wealth and securing your future, make sure your assets are protected and your loved ones are provided for in the future.
By Nicole Farbo, CFP® Published
-
Is Chasing the American Dream Ruining Your Financial Life?
Too many people focus on visible affluence as a marker of success. Here's how to avoid succumbing to the pressure and driving yourself into debt.
By Anthony Martin Published
-
Retiring With a Pension? Four Things to Know
The road to a secure retirement is slightly more intricate for people with pensions. Here are four key issues to consider to make the most out of yours.
By Joe F. Schmitz Jr., CFP®, ChFC® Published
-
How to Teach Your Kids About the Tax Facts of Life
Taxes are unavoidable, so it's important to teach children what to expect. Also, does your child need to file a tax return for 2024? Find out here.
By Neale Godfrey, Financial Literacy Expert Published
-
Revocable Living Trusts: The Good, the Bad and the Ugly
People are conditioned to believe they should avoid probate at all costs, but when compared with living trusts, probate could be a smart choice for some folks.
By Charles A. Borek, JD, MBA, CPA Published