Should you jump in the pool?

Come on in! The water is perfect… or maybe it's cold… at least it's colder than it used to be… I believe that it will get better… hopefully soon… actually my teeth are beginning to chatter… I don't know… maybe you shouldn't get back in the pool just yet… aren't you supposed to wait an hour after you eat?

Actually I doubt investment returns can be based on what you ate and when you ate it, but lately I have heard so many different economists draw so many obscure parallels in an attempt to explain the markets and predict market behavior that it may only be a matter of time until someone connects digestion to investments. All the economic gurus are trying to answer the questions on everyone's mind. Have we reached the bottom? Should I get back in now?

Hopefully you never got out. Unless you needed the liquidity or you realized that your portfolio was truly out of line with your risk tolerance, there has never been a reason to flee. The week of March 9^th we saw a +10% mini-rally in the stock markets. You missed out on it if you were on the sidelines. One economist I follow (Brian S. Westbury, Chief Economist, First Trust Advisors) recently said that there was enough money in money markets now to cover 60% of the market capitalization of the S&P.

So if you have cash, is this the bottom? Is this the time to get back in?

I can't give you a definitive answer as to if we have reached the bottom. I just don't know. No one does. Unfortunately bottoms are a lot easier to see in the rearview mirror than out the front windshield.

But my opinion is strong that if you have cash on the sidelines, now is the time to be in! You may not have come in at the absolute bottom, but there are many opportunities out there.

If there has been any lesson to be learned from this volatile market, we need to make absolutely certain that the investment portfolio matches the risk tolerance of the investor. Today there are many investors who used to think they were willing to take risk. Now they know the truth. Be honest and realistic during portfolio construction. If you are, you will have no regrets later about when you got back in the pool.

Gray's Jump by Michael Keen