John Coumarianos: How to buy stocks now if you’ve missed this massive bull market

Have you missed the rally? Here’s what to do now.

First, acknowledge your mistake, but don’t gnash your teeth. Failure to acknowledge the mistake and excessive dwelling on it are both unproductive, and can cause further damage. If you don’t admit what you did wrong, you’ll likely do it again. And if you dwell too much on it, you might move all your money into stocks now. Neither approach is reasonable.

Second, once you’re calm enough, try to figure out what a good allocation to stocks is for you, and vow never to change it. The best investors aren’t necessarily the ones with the highest IQs, as Warren Buffett likes to say. Rather, they are the ones who are most disciplined and can stick to a plan.

Third, if you’re sitting on a lot of cash, move it slowly and deliberately. There’s no need to achieve that balanced exposure (or whatever exposure will prevent you from selling next time) today. You can move it gradually over the next two or three years. Every month add a little bit to a balanced fund or a group of funds in proportions that constitute your target allocation. This is called “dollar-cost-averaging” in financial jargon.

If a market plunge occurs before you’ve put all your money to work, welcome it as an opportunity to buy at a lower price. Don’t deviate from your two- or three-year time frame though. Remember that the market declined 50% from its pre-2008 peak to its March 9, 2009 bottom, so even a 20% or 30% decline may not represent a bottom.

Stick to your plan, and don’t worry about catching the bottom. If the market declines sharply over the next two or three years, and you’re dollar-cost averaging, you’ll likely buy plenty of shares low enough to make you happy after a decade.