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The markets are down. Should I keep investing?

Data science · Data Visualization · R Shiny · Money tools

It is pithy advice to say that your investment strategy should not reflect volatility in the markets.

A consistent deployment of capital (based on your savings rate, which can be calculated here) is said to be boring but effective. It takes away the change and risk involved in trying to time the market. It allows you to build savings (for the purpose of investment) into your budget, smoothing your cashflow relative to sporadic investing. It can save you from yourself.

But when markets go the way of gravity, this approach can test your resolve and psychology. This calculator (built in R with shiny ) allows you to compare the difference in two strategies.

Strategy # 1: Continuous investing

• Capital is deployed month-over-month into the market

Strategy #2: Paused investing

• Stop investing in the market, while letting your current portfolio move with market trends
• Bank the money you would have invested as cash (along with interest on that cash)
• Deploying all the saved cash (and interest) back into the market at a later date

This calculator is based on historical stock market data (courtesy of Yahoo! Finance, accessed in R through the quantmod package). You can see how sitting out of the markets during, say the 2008 financial crisis, or investing through it impact your long-term portfolio. This calculator assumes that cash is invested month. Launch it on a desktop browser for easier use.

Outcomes

While there may be scenarios where the market can be timed just so, generally, investing continuously - even through recent downturns - may be the winning strategy. Prolonged periods of market hold-out have a more pronounced impact on portfolio values.