Should You Wait for Market Bottom?

Q I just opened a brokerage account with an auto-investment feature that will let me regularly invest in an S&P 500 index fund. Should I wait until the market hits bottom before I begin investing? I opened a Roth IRA last month that lost 14 percent already, so I'm nervous.

— J.W., online

A The problem with waiting for a market bottom is that we can't recognize it until it has passed. So you might be on the sidelines when the market begins recovering. It can be costly to be out of the market on days when it rings up big gains. On Oct. 13, 2008, for example, the S&P 500 surged nearly 100 points, or fully 10 percent. Those who would have wanted that gain but were waiting lost out.

If you're nervous about where the market is headed, do what you're doing: Gradually invest money over time (this is dollar-cost averaging). That way you'll get shares when they're both lower priced and higher priced and won't have to keep guessing about the market's direction. Don't fret too much about a onemonth loss — what matters is that you choose good investments and are focused on long-term performance.

Q I have $500 and want to start investing in stocks. What should I do?

— T.W., Dover, N.H.

A You can learn more about brokerages and pick one at www. broker.fool.com. But before jumping in, make sure you have an emergency fund ready, with several months' worth of living expenses. Next, consider taking some time to read up on investing. Perhaps start with "The Motley Fool Million Dollar Portfolio" (HarperBusiness, $27) or John Bogle's "The Little Book of Common Sense Investing" (Wiley, $20).

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