Is now the time to invest?

I have a small cash windfall. I'd like to invest it in a mutual fund but I am concerned about immediately losing value. You've been saying "stay the course" to people already in the market. But what about someone just thinking of getting in?

My first question for you is "do you have an adequate emergency fund?" The definition of adequate varies from person to person but generally speaking a decent sized emergency fund would cover three to six months of your "must pay" expenses like the mortgage, your car payment, utilities, etc.

Assuming you are all set in the emergency fund department, I would then ask you when you will need the money that you are considering investing. If you will need it for a major purchase in the next 3 to 5 years, the stock market is not an appropriate place to be. CDs or high yield savings accounts would be better.

If this is long term money, or money you definitely won't need in the next 5 years, I think investing in an equity mutual fund would be totally appropriate. There is no way to "call the bottom" of the market so you have to be able to get past the possibility that you might lose a little bit of money in the very near term. We simply can never know in advance when the market has hit its bottom.

However, many professions think we are at or near the bottom which would signal a good buying opportunity. In an op-ed piece in Thursday's NY Times, Warren Buffet declared that he was investing his personal money in the market right now even though he had previously owned only government bonds. I'd say that if Warren Buffet is investing his own personal money in US equities right now, that is a signal worth paying attention to.