According to a preponderance of clients, the stock market is overbought. They’re going to invest, but not until the pullback takes place. What’s an advisor to do? 

First, it’s not "the" pullback we’re talking about.  It’s "a" pullback. The market always pulls back. Time doesn’t cause a pullback. Events cause pullbacks and there is no shortage of events to report on. 

When does a client decide enough is enough? “I can’t spend my life waiting for the next pullback. I’ve got to get started sometime.” In the movie Summer Catch, one of the characters said that the Indian rain dance always worked because the Indians danced until it rained. We can call this the client pullback dance.

A lot of clients will prevail and wait, because not all advisors are confident about the market. Simply put, we are generally more concerned about losing money than we are about trying to make money for our clients. 

Let’s assume your client prevails and he or she waits for the pullback. In my career, I’ve never recognized a pullback until it was over. Neither has your client. The market will pull back, he won’t act and then he’ll be waiting for another pullback. Long-term investors ignore pullbacks.  

If you think waiting for a pullback is not the right strategy, assert yourself. 

Explain the ins and outs of dollar-cost averaging. Dollar cost averaging eliminates the need to time the market, which is too fragmented to time anyway. If you put $30 worth of gasoline in your car every Saturday, the average cost of a gallon of gasoline becomes lower and lower.

Explain the perils of market timing. Getting in too early is not the mistake. Getting in too late is the mistake. If you are standing on the platform when the train has pulled away, it’s not going to back up for you. When a bull market takes off, it’s not going to back up for you.

Then explain how asset allocation and proper diversification lessen the need to depend on exquisite timing. If we allocate and diversify properly, it’s as if we planted many seeds in a garden. We don’t expect every seed to blossom into a beautiful flower. That never happens. The good news is that when we are wrong, we have lost one seed of many, not the only flower we planted.

Pullbacks are overrated. I assure you the trend is up. When I was born, the Dow was hovering around 190. When I was a new advisor, the Dow was hovering around 900. Ten years ago, the Dow was hovering around 9,000. It’s now hovering around 15,000. 

So, Mr. and Mrs. Client, as your advisor, I urge you not to depend upon a correction that may or may not happen in accordance with your desires.  Rather, I urge you to determine your goals and together we’ll devise a logical strategy for achieving them. Let’s try to rule out as much stress as possible. The journey to your goals is a marathon, not a one hundred yard dash. There have been lots of lucky sprinters throughout history. There has never been a lucky marathon winner. A marathon is the stepchild of long term planning.  A dash is mayhem.    

Let the amateurs chase short-term performance. You get on with your plans.