Investing in equities remains the “surest way for an individual with a long time horizon to build wealth,” and not miss gains in the market, said Robert Johnson, president of The American College of Financial Services in Bryn Mawr, Pa.
Many individual investors overreacted in the aftermath of Black Monday and sold a large percentage of their stocks. By the end of the volatile week, all the major indexes reversed their course and erased the massive losses from last Monday.
An investing strategy which is disciplined and consistent will help investors avoid making hasty decisions based on emotions of fear or greed. Dollar cost averaging, which entails investing a fixed amount into the market through a 401(k) or IRA every two weeks or monthly, builds up a retirement portfolio. A low cost equity index mutual fund or ETF is a good option, he recommends.
“There is no time like the presentto get into the market for the first time or to get back into the market,” Johnson said. “The essential part is to maintain the discipline to invest whether the market is up or the market is down.”
The attempts by individual investors to time the market by determining when the market might rise or decline is a “fool's game,” he said.