If you’ve been investing for more than thirty minutes or so, you’ve had another investor tell you in an earnest tone “You can’t time the market!” A good argument against this common maxim is that you obviously can.

No investor can see the future (without getting whacked for insider trading), but it is possible to anticipate certain inevitabilities with regard to the global marketplace. One such unavoidable future events is the next financial meltdown. Whether you are an investor observing the current frothy prices all around the marketplace, or you’re merely observing that it sure has been a long time since the Great Recession, the fact that the Dow is reaching new heights every single day has to make you a bit nervous.

Investment Plan
PeteLinforth / Pixabay
Investment Plan

Keeping your ear to the ground is an important skill to possess when you’re an investor. As Warren Buffett famously said, Be Fearful When Others Are Greedy and Greedy When Others Are Fearful” It’s a little too easy to be confident when the markets are doing extraordinarily well. More than a few times in modern history, such periods have been mere preludes to some of the most trying economic times endured by society.

So let’s examine again, is it ever possible or wise to try to time the market?

When we’re considering long investment timeframes, no. At almost any period in American history, even at economic peaks, you would do well in the stock market if 1) you were well diversified, and 2) you left your money in the market for sufficient time (usually 30 years or more). Certain studies even indicate that theoretical individuals who only bought stocks at economic peaks still did quite well, given time.

But not everybody has that kind of time. If your portfolio allocation is too aggressive, this is the time to catch it in its tracks, before a sudden economic downturn surprises you. If you have less than 30 years to keep your money in the marketplace, it may be time to seriously reevaluate your current allocation.

The thing you don’t want to do is sell, even and especially if you find yourself bruised and bloodied at the bottom of an economic downturn. While we’re still at the top of the hill, it’s important to use our imaginations to try to figure out how we’d feel at the ebb of a recession, given our current allocations. Would you be able to deal with your losses?

If not, it’s time to start changing your allocations, adopting more bonds or a new or what have you. Sure, you won’t be able to sop up all of the growth we’re experiencing now, but at least you won’t be shocked and dismayed when the new recession inevitably finds us.

If you’re not aware, America is currently in its third longest economic expansion of its history. We almost certainly won’t last beyond Trump’s first (only?) term before experiencing another. With that knowledge in place, carefully reevaluate your holdings. Is your current allocation sufficient for your future needs, given all future possibilities? This isn’t market timing. It’s conforming to reality.