When it’s time to choose your 401k fund options, you’re probably wondering which way to go: the S&P 500 index fund or the plain but stable value fund paying less than 1 percent?
I’m bullish on the S&P because in this very young 2013, the S&P 500 is already up about 5 percent. The Dow Jones Transportation Index, which holds transport-related companies like railroads, airlines and shipping companies, is flirting with an all-time high.
Speaking of transportation, you may be wondering if the train has already left the station for stocks this year.
Isn’t this always the conundrum we face as investors? Am I too early? Am I too late? The stock market turns us all into versions of Goldilocks.
Even an investing great like Warren Buffett will tell you it’s impossible for anyone to time the market (at least over and over again). Timing the market is a fool’s game. But being in the market isn’t foolish.
Whether you’re deciding on the mix of funds in your 401K or deciding how to invest additional money in your portfolio, here are some important facts about stocks…
Corporate earnings for the full year 2012 will reach the highest level in history for the S&P 500. It’s at almost $90 per share. In 2007, the S&P 500 was at just $66 per share. That’s certainly positive for stocks.
Interest rates are the lowest they have been in our lifetime. So relative to buying bonds, stocks look like a pretty good deal over the next five years. Again, positive for stocks.
Housing hasn’t really helped what has been a slowly improving economy over the last four years, but is finally showing genuine improvement. The Case-Shiller Home Price index’s last reading shows home prices in the U.S. are up 5.5 percent year over year, again bullish for the economy and stocks in the intermediate term.
We’ve gone almost 500 days now without a 10 percent correction in the S&P 500. That’s the tenth longest streak of its kind. Nothing goes straight up forever (See: housing bubble) without encountering some turbulence. So the forecast here is less bullish.
Bottom line: Yes, this is a good time to get into the market. In fact, if you maintain a long–term perspective, any time is a good time to get into the market. The short-term conditions are ever-changing and there will be ups and downs, some of them dramatic. But over the long haul, I’m not inclined to bet against America or the U.S. stock market.
So, don’t worry about when to get on the train. Just get on. The destination, no matter when you board, is the same for all of us – to become the happiest retiree on the block!