Instead of making regular monthly payments on our student loans (in addition to the minimums), I prefer to let the savings build up in my checking account and then make lump sum payments. While this isn’t the most automated solution, it gives a buffer so that I have more time to think about what I want to do with each chunk of money, every 2-3 months or so.
Well, I’m at another one of these crossroads and it just so happens that it comes at a time when the S&P 500 has increased over 15% in the past 6 months. While I have no idea how to ensure this happens and I don’t try to time the stock market, as a general rule, I want to invest at low points and sell at high points.
So when there’s a big rally, do I really want to be investing after such big gains? It’s possible it will keep going, but it’s possibly there will be a pullback. I have a few options:
Invest Anyway Because I Shouldn’t Try To Time The Market
If timing the market were easy, people would be better investors and more people would sell at the top and buy at the bottom. But in reality, people are emotional and don’t want to sell when things are looking good and don’t want to buy when things are looking bad.
Since I know I can’t control or time the market, maybe I should invest the extra money and hope for the best? Since I don’t know what will happen in the next 6 months, year, or 5 years, what makes me think there will be a better time to invest? For all I know, the next 6 months could be the biggest rally of our lifetimes.
“Invest” At A Guaranteed 5.25% Interest Rate By Paying Off Student Loans
We’ve still got a lot of student loans to pay off and while most are in the 2-4% range, there are some still left at 5.25%. With the lower rate loans, I think that even with conservative investments, I will beat that over time. At 5.25%, should I take the guaranteed returns or risk it by investing in stocks? I think over the long-term, I will beat 5.25 (and by several percentage points), so I don’t think this is a great choice for me.
Invest in Alternative Investments That Don’t Track The General Market
Since I’m not 100% comfortable with the idea of sticking more money into the market right now, maybe I can invest with Lending Club? That type of investment is less correlated to market fluctuations and my investments have earned me nearly 11% since I started, so why not take those kind of returns that did well even during the recession?
Change My Investing Pattern To Dollar Cost Averaging And Automate My Investments
Maybe I’m just being too lazy and not admitting that I need to automate my investments. Why wouldn’t I automate this whole thing and not have to think about it or worry about market fluctuations?
The reason I don’t is that part of my income comes from my online endeavors and I never know how much I’m going to make. Some months are good and some months are not that good, so why would I set up a plan to invest that rests on making consistent contributions each month?
Plus, the amount I’m allowed to contribute also depends on this income, so quite often I don’t know how much I’m allowed to contribute until the end of the year.
I’m leaning towards investing because over the long-term, it will beat that 5.25% and while I like diversifying my investments, I don’t want to put more time into managing my Lending Club account.
Readers, which option would you go for?