Suze Orman has some strong words for listeners who are considering drastically changing their IRA investment strategy. On a recent episode of the Women & Money podcast, a listener named Jane expressed concern about the current state of the market and asked Orman if it would be smart to sell all of her IRA investments right now.
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Jane says the idea is to put the proceeds into a money market fund in an IRA, then dollar-cost average the return to the market over time, assuming prices can drop soon.
Orman responded immediately: “That’s the worst idea I’ve ever heard in my life.”
“Jane, don’t do that,” KT, Orman’s wife and his friends, called Orman’s feelings. He quickly explained why he suggested this strategy.
The biggest flaw in Jane’s idea, according to Orman, is the assumption that the market will go down. No one can predict this with certainty. “You never know when they’re going to go down,” Orman said. “He can keep going up and up and you’re sitting on the sidelines waiting for him to come down.”
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By selling all of her holdings in the IRA, Jane will, in effect, try to time the market. Orman says that this has a big risk, because there is no guarantee that the market will go down and Jane can take advantage of potential profits while waiting for a drop that will not happen. Orman highlighted that staying invested allows growth opportunities to continue, even in uncertain market conditions.
Orman suggested that Jane focus on a more traditional approach by keeping her current investments while adding new money to her IRA. He recommends that Jane apply dollar cost averaging to her contributions, which involves investing a fixed amount, regardless of market conditions. Many investment experts say that this approach can help reduce the impact of volatility over time and does not require trying to anticipate the highs or lows of the market.
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