An investor recently asked us a question that touches on several stock market investing concepts that we cover in our Canadian Wealth Advisor newsletter.

He said, “Due to a corporate reorganization, I now have the option of cashing in $279,000 from insurance-company mutual funds, then transferring the money into my brokerage RRSP account. I prefer to invest the money directly in stocks you recommend, rather than hold mutual funds from my insurance company. However, the insurance company tells me that I have to cash in the funds first, then wait at least six weeks for the money to turn up in my brokerage RRSP account. I’m concerned that the market will turn up while the money is in transit and I’ll wind up missing out.

What should I do?”

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Consider the random element in short-term market movements

Like a lot of quirky investment questions, this one has no simple answer. After the market downturn we recently experienced, we suspect that a continued market climb is more likely than a plunge. We would hesitate to refrain from stock market investing for six weeks. However, there’s an undeniable random factor in short-term market movements. The market could just as easily fall as rise in that period.

That’s why, when you are planning your stock market investing, we recommend that you buy investments with an eye to holding them for the long term in our Canadian Wealth Advisor newsletter.

You could deal with this situation by doing a series of transfers — 10% a month for 10 months, say. That would limit the risk of holding a lot of cash during a market upturn.

You could also do the transfer immediately, and try to take advantage of a seasonal stock market investing trend in which the market sometimes rises from early October until the following April. However, trends like these are by no means reliable.

If you are determined not to miss out on any market upturn that occurs while you are in cash, you could take out a short-term loan of $279,000, and invest the money in one of the no-load index funds we recommend in Canadian Wealth Advisor. Then, sell the index fund when you receive and reinvest the RRSP transfer. (The drawback here is that, unlike your RRSP, this investment isn’t tax deferred.) Or you could just accept the risk that the market could rise or fall while you hold cash.

As we said, there is no simple answer. All you can do is choose the risk you find least offensive.