I invest my money on a fixed schedule. Every month I place a bit of my hard earned cash in investments that follow some index in the stock market. Making monthly investments is the strategy I’m best comfortable with since I don’t believe that I reliably can predict the market.

This brings me to my central question.

What if I see something that makes me want to invest in-between my automatic, monthly, and slightly boring investments?

First off — I want to make it very clear that I have no presumption of being able to reliably predict how the stock market will perform. I am extremely humble and thankful that I have the privilege of “gambling” with any money at all. There are so many people who do not, and maybe never will have such privilege. Placing money in any type of risky situation can cause harmful consequences if done without caution. Investing could put you out of luck, so for the love of all that is holy, please think for yourself, and don’t ever assume that any investment is safe, no matter what anyone tells you.

Let me give you some context. Some investment I have experienced a non-insignificant dip that lasted about six weeks. I’m honestly a bit frustrated that I wasn’t in a position to exploit the situation. If I had money to spare from my nest egg — money that I have in savings — I would have been able to invest.

Right now you might be ready to stop me, telling me that using saved up money for investment is a risky move. However, taking advantage of an assumed slow-ish market variation, like the one i observed in July to mid-August, is something I’d like to try (and get experience with).

By intervention-investing at any given time I’m placing a bet that the market is in a state that it’ll recover from. If it turns out I was wrong my money will now have a little less value, but I’ll still keep it in the market — at its lower value — which, personally, I’m comfortable with, and think is a good idea. This comes from my belief that the type of investments I make will recover in the long run … however long that “run” may be is largely irrelevant to me.

If I didn’t “lose” by having money in the market when it dips, then what type of risk do I assume to be taking by using the nest egg money?

My first priority is to keep my nest egg healthy.

I won’t allow myself the option of seizing other similar, or better, opportunities until I’ve rebuilt the nest egg. If an unexpected event happens it might force me to withdraw money from my investments, and that’s something I’d rather not do.

In other words—if I use cash from my nest egg to invest I also forfeit the opportunity of doing it again until the nest egg is whole again.

And that’s what I consider to be the risk. Now that I’ve understood this about myself, I’m ready to move on to more difficult matters.

How do I decide to seize an opportunity?

If I see something that I recognize as an opportunity and I have the means to explore it, it would be silly of me to pass it up in the hopes of later encountering something better. Expecting that a better opportunity will show up is just another way of thinking I can predict the future. I don’t believe that I, or anyone else for that matter, have prophetic powers. On the other hand, interpreting everything as an opportunity — like the neurotic variations in the market — is to me equally bad.

I imagine being on a surfboard trying to decide which wave to catch.

If I go for every wave that comes towards me I’ll miss a lot of other, better waves. I might be lucky enough to catch a great wave, but I might not. However, if I’m constantly dismissing every wave because I’m not certain it’s the best one I won’t be doing a whole lot of surfing, right?

And that’s not even the worst part — if and when that crazy awesome wave shows up, I might not have the surfing skills needed to ride it.

Possible problems with the surfing metaphor include that

• waves, unlike the stock market, can be predicted with some certainty,
• it’s debatable whether there’s skill involved in “riding a stock wave”,
• and the worst case scenario is catching a boring wave—betting on financial instruments can cause more serious negative impacts.

But I still find the metaphor useful to viscerally remind myself why I’m comfortable with this strategy and level of risk-taking. Better than average opportunities are bound to show up at some point, and when they do I’d like to be ready to ride the wave.

The second problem with my metaphor is perhaps the most interesting to examine. Let’s think about this problem, the worst case scenario, in which I lose all my invested money. Provided that my nest egg is large enough to keep me afloat for six months, I’ll assume that I went completely bonkers and invested one month’s worth of money. Fast-forward a bit, and all of my investments have dropped to 10% of the value they had when I made the investment. Since I keep my nest egg in a safe environment I’m now left with five months worth of cash to my name. In the larger sense I’m actually not in a particularly dangerous situation — even if I lost my job I’ve still got a five month parachute to figure things out. In other words, I don’t need to sell my stereo (or my investments) at a crappy price in order to survive. Hopefully the investments will recover while I listen to some chill ambient music and consider new job opportunities.

If your gut reaction tells you “But … but … investments is my moneyz!” then you’re relying way too much on investments for financial and/or emotional stability.

It’s been said so many times that it’s come to sound like a platitude, but I want to say it once more: Never invest money that you can’t afford to lose*!

··· or ···

Never ride a wave that could kill you!