Should You Get Out or Stay for the Ride?

Blog post #391

As many US market indices are at or near all time highs, and International markets are also performing strongly, many are asking the opposite question. Have US markets reached new peaks? Will they go higher? 

On Monday, the Wall Street Journal had an article titled “As Stocks Climb, Some Investors Wonder When to Get Out.” The article started by asking that as stock indices approach new record highs, it “leaves investors with a difficult choice: Lock in this year’s startling gains or hang on for the ride?”*

As an investor (and client), this may seem like a reasonable question. What should you do and how should you react when markets set new records? Will markets go higher? Should you be selling now?

This is another time we can be valuable as your financial advisor and guide, to provide you with advice and clarity during key moments and to help you avoid what could be a critical financial mistake.

We encourage and help you to be rationally optimistic. We help you to be rational, and not emotional, as you deal with uncertainty, especially in the financial markets. These principles enable us to provide you with financial and investment advice that is timeless and can be effective, if you are disciplined and patient.

We remain rationally optimistic about the long term financial markets, both in the US and overseas. History and academic data teaches us that corporate earnings will continue to grow, which will lead to higher stock markets in the future, both in the US and Internationally. 

Despite the fears and declines at the end of 2018, far more corporations have reported solid earnings for the first quarter of 2019 (so far) than declines in their revenues or earnings. Good earnings reports and guidance for continued earnings growth, along with the change to stable interest rates, have propelled stocks so far in 2019. 

Even though US markets may be at or nearing highs, and International markets are doing well, we recommend that for your long term financial future, you do not exit the stock market. This should not be a time to sell off a major portion of your stock investments.We know that you cannot successfully and accurately time the markets and predict the high and low points.

Instead, as your financial advisor, we already have a plan in place to handle market increases, which we call “rebalancing.” We have developed an Investment Policy Statement for each client, which details the intended allocation to stocks, based on your specific circumstances. 

For example, if your target allocation to stocks is 50%, as markets increase and the stock allocation increases to 55%, we would review your accounts and consider selling certain stock asset classes, to bring that allocation back towards 50%. We do not do this in an attempt to time the markets or make short-term market predictions. This is a disciplined strategy of maintaining your desired stock allocation, which has the long-term benefit of selling high and buying low. 

This gradual tweaking of your portfolio does allow for some selling as markets reach new highs, but more importantly, also allows you the opportunity to gain from further long-term increases in the markets.

Remember, the stock market has many more positive days and years than negative ones.

Remember, US and International stock markets have increased significantly over years and decades. We expect these long term trends to continue, with bumps along the way, of course. 

To reap these long term rewards, you must remain invested in stocks. You must be in the game.  You should stay for the long-term journey.

And it’s our role to help you along the way, so you can remain invested and have the ability to reap the long-term benefits that stocks can provide. 

Prior to working with our firm, you may not have had a disciplined strategy for how to handle the stock market reaching new peaks. Now
you do. 

We provide you with understandable answers and advice to these key questions. We provide you with clarity and guidance, so you can have a greater sense of financial security, comfort and success. 

If you have friends or relatives that could benefit from the advice and guidance which you have received, please let them know about our firm. We would be pleased to help them as well. You can start the conversation. 

Source

“As Stocks Climb, Some Investors Wonder When to Get Out.”The Wall Street Journal, by Ira Iosebashvili 04/22/2019  


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