My model retirement portfolio shot up 5.1% in March, reversing prior weakness to finish the first quarter with a gain of 4.1%.

After only nine months, the portfolio has racked up total gains of 29.4%. Not bad, especially compared with a companion model of exchange-traded funds, which in more than six years has advanced only 39.9%.

Forget about market timing: The best time to invest is always right now.

And the best thing to invest in is often whatever is performing worst at the moment. In March, that was true of commercial real estate, which has the second-worst three-year returns among mutual funds (behind only Japanese equities), but by far the best returns in the month. continue »

The S&P 500 index eked out a slender 4.9% advance in the first quarter, justifying the pessimistic outlook I’ve maintained since the end of last year. And stocks have been positively sparkling compared with bonds, which have been so lifeless I’m surprised they didn’t have a starring role in Tim Burton’s funereal Alice in Wonderland.

So while my model portfolio of exchange-traded funds dribbled up a measly 4.1% in the first quarter–thanks to a surprisingly robust March–I am not inclined to make any sweeping changes. The second quarter could be worse.

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I got this question from a reader this morning. In a recent column I predicted a correction–a 10% decline–in stocks prices, and reader Mark B. asked if I meant a decline of that magnitude from January’s close or, if not, what? He added, “Many of us are late buying back in, and may be thinking about re-entering smarter.”

The correction I anticipate is from the recent bull market high, reached in the middle of January. As of Jan. 31, the S&P 500 was down 3.7% from there, so I mean a further decline of at least 6.3%. I am hardly alone in making this forecast.

But this adds emphasis to Mark’s original question: When should I buy back in? Here’s my answer.

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Stocks took a pause in January, especially in the riskiest markets, with the S&P 500 Index slipping 3.7%. My two model portfolios, of exchange-traded funds and 401(k) mutual funds, did much better but still surrendered some of last year’s profits.

Traditionally, a weak January presages a negative year for domestic equities, although last year was an exception. I don’t attempt to time the market so signals like this don’t interest me much. I do think, however, that weakness will continue until we get a little more clarity on conditions in Washington. As Thomas Friedman noted in today’s New York Times, the United States under Barack Obama suffers the kind of political instability usually associated with countries like Venezuela.

So I’m making no changes to the models, except to tidy up excess cash in the ETF portfolio. I expect a full-fledged correction–i.e., a decline of more than 10%–in global equities, and if it comes I’ll take profits in bonds and add to my stock holdings. Fundamentally the future is much stronger than the recent past, not least because Congressional Democrats are being emasculated. continue »

My model portfolio of mutual funds in the most widely held 401(k) plans shot up 24.3% in the second half of last year, and is poised to reap further gains in 2010. If the late bear market scared you away from investing, it’s time to jump in again.

December was a splendid month for the portfolio, which advanced 2.6%, despite a poorly timed move into foreign bonds. It was paid for with a halving of the portfolio’s investment in emerging markets stocks, and while they lagged domestic small caps, they still did better than the bonds with which they were replaced.

So is it time already to dump those foreign bonds? continue »