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A reader got in touch the other day with an investing problem I have heard, oh, about a million times before. While converting his mutual funds to a DIY account at an online broker, he has hit an impasse. I’ll let him explain:

“I’m hesitant to reinvest now when stocks are considered expensive. Would rather wait for big correction in market. Problem is, everything I’m reading says the time to get into the market was yesterday.”

Stocks plunged in the fall and then zoomed back most of the way in early 2019. So, no, stocks today aren’t the bargain they were back in late December. Should nervous investors wait until the next correction to jump in? No, they should not.

The reason is simple: When the spit hits the fan, these investors will not want to get into the market. They’ll hem and haw and finally make a move well after stocks have begun their recovery. So here’s what this reader can do: Divide the money intended for stocks into four segments and then make quarterly purchases over the next 12 months.

There’s a strong chance that this approach won’t deliver the optimum return, mind you. Academic research shows that lump-sum investments generally outperform gradual investments, also known as dollar-cost averaging. What the gradual approach does is protect your fragile psyche. If stocks plunge in the months ahead, you can take comfort from the fact that you have lots of your money still in cash. If stocks surge, you’ll have at least some of your money working for you.

The less people try to synch their investing with market moves up down, the better. When you guess where the market’s going, there’s way too big a chance of making mistake that leads to long-lasting damage. I still hear from people who sold their stocks in the worst of the 2008-09 market crash and have never recovered their losses.

If you’re putting new money into your portfolio, invest it automatically every month or biweekly (when you get paid). If you’re sitting on a pile of cash, feed it into the market gradually. Stop contemplating your investments and start automating them.

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Rob’s personal finance reading list …

Your cheapest coffee options

Gotta tell you, I buy a medium coffee every day from an Ottawa coffee chain called Bridgehead and I’m happy to spend the money. How much might I save if I made my own coffee? This blog post provides the most detailed cost breakdown on coffee that you’re ever likely to find.

What’s ahead for housing in 2019

Maclean’s talks to some experts who see comparatively calm market conditions. I recently argued in a column that today’s market conditions suggest there’s no rush for first-time buyers to make their move.

How to make your dishwasher last longer

Consumer Reports talks to manufacturers about how long their dishwashers should last, and then offers some tips to help you make sure your dishwasher lasts that long.

Where to find an instant low-cost investment portfolio

A blogger performs a great public service by listing all the various balanced ETFs now available to investors and picking a favourite. Balanced ETFs offer different mixes of stocks and bonds for different types of investors. They’re an awesome way to invest simply and cheaply.

Today’s financial tool

A financial planning firm has produced a useful primer on the basics of RRSPs and TFSAs.

Ask Rob

Q: My husband is planning to retire in another year. He has to take his pension in a lump sum. I know that annuities guarantee your income, but can have higher fees. Can you suggest a better option?

A: I have spoken to advisers and financial planners about annuities and they tell me that the fees they receive for selling them are less than they get for other options, such as mutual funds. So don’t dismiss annuities on that basis. Monthly income mutual funds and exchange-traded funds might work as an annuity alternative, but they don’t guarantee the income they pay. A diversified portfolio of dividend stocks and bonds is another non-guaranteed alternative for generating retirement income.

Do you have a question for me? Send it my way. Sorry I can’t answer every one personally. Questions and answers are edited for length and clarity.

What I’ve been writing about

  • Critics of the overhauled CPP say it’s a bad deal – here’s why they’re wrong
  • Saving money without pain or effort? Yes, it’s possible with these apps
  • Rob Carrick’s 2019 ETF Buyer’s Guide: Best bond funds (for Globe Unlimited subscribers)

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