Often times, when volatility gets extreme, some investors begin to wonder if going to cash for a period of time makes sense for them. Here is an example of the outcomes from going to cash in 2009 and waiting for volatility to die down:

• Dark green line: Staying invested
   
• Light green line: Going to cash for a year between March 9, 2009 and March 9, 2010 (and this of course makes the dubious assumption that one could time the exit and entry points just right)
   
• Red line: Going to cash on March 9, 2009 and staying on the sidelines

Sobering how waiting till the smoke clears might make you feel better in the short-term, but it won’t get you closer to your goals.

In effect, when we say, “I want to wait until the smoke clears”, what we are really saying with out really meaning it is, “I want to invest at higher prices to the current discounted prices”. This is something we never say when buying a home or a car, or paying for a vacation, we never say we want higher prices and instead ask for a call back when things go on sale. We’re not trying to dismiss or belittle the discipline required to stick through or invest more money through prolonged market downturns, but if an investor can at the very least stick with their plan they’ll very likely be better off for it, and if they invest when discounts present themselves during downturns that’s even better and their future self will thank them!

Randy, Ian & Harrison