When you invest money in the stock market, there’s an emotional attachment that people have. You’ve saved diligently to build up your retirement and invest, and no one wants to lose money.
Unfortunately, markets have ebbs and flows where you can see your portfolio rise and fall.
Since March 2020, the markets have really rebounded. Investors are nervous about the right time to sell. When you dig into the news, you’ll see the market hitting record highs and many people think that now is just a good time to sell.
The market has to come down eventually, right?
Well, not necessarily.
The Market is High: Should I Get Out?
Markets are rising daily, and the media’s job is to promote this all of the time. When people hear “new highs,” they get concerned that the market will burst. However, you make money on new highs.
Ideally, the market will continue to rise and make your portfolio grow.
Sadly, there’s no way to predict whether now is a good time to sell based on a market high. Guessing what the market may do is almost impossible. For example, due to politics, many investors assume that a new president will cause the market to tank, and it won’t.
What we do is:
- Analyze the data
- Make informed decisions
In our business, we try to keep stress low by using the data we have to make smarter decisions.
For example, many people will follow the “buy and hold” philosophy of investing. Essentially, a person will invest in a stock, or many, and hold on to the stock for the long-term. If the stock falls, the person holds.
If the market crashes, the person holds.
Unfortunately, if you’re close to or in retirement, it can be very stressful to find yourself in this situation. When your portfolio takes a dive and you’re not working anymore, it can be very troubling to see the value of your portfolio fall 40% or 50%.
Instead, we look at bonds, stock and cash as if they were in a race.
Stocks only lose the race if they’re falling. In a good market, stocks will build higher value than bonds, CDs and other investment vehicles. When our indicators show that stocks are slowing, we like to reallocate investments into bonds or cash, depending on how the market is for each.
You won’t keep your money in cash for a year or two – it’s a short-term process.
The 2020 market dip is a prime example of how we reallocate your investments to save you money.
What Happened in 2020?
Due to global uncertainty, stocks started to fall. Our indicators predicted this, so we adjusted the portfolios for our clients to take their money out of stocks and put them into bonds. Unfortunately, the bond market also started to fall, so we went to the next best thing: cash.
In our most aggressive portfolio, we stopped losses at 9%.
Cash didn’t lose or gain value, so it remained steady while the stock market fell 34% during the same period.
We sat on the sidelines with cash for about 40 days before we felt investing in the market was the right choice. The numbers told us that the market was rising, and by the end of the year, the market rose 17%.
Due to these key changes, our growth portfolio rose 19% rather than taking a massive loss as other portfolios saw.
Emotional Toll on Retirees
Our clients are either nearing retirement or in retirement already. When you’ve worked hard your entire life, you don’t want to stress about losing all or part of your retirement fund overnight.
Our active approach uses numbers rather than emotion to invest.
Using numbers is an analytical approach, and it eases the toll on retirees because it empowers these individuals to make smart money moves. Our data showed that in 2020, small businesses were really struggling and that large companies, like Amazon and Zoom, were propping up the market.
Technology stocks also kept the market afloat because everyone was working from home.
Fast-forward to 2021, and the data showed that the market shifted to small- and medium-cap stocks. Again, the data helped us adjust our clients’ portfolios to continue growing their retirement with as little stress and worry as possible.
So, Should You Sell in a High Market?
Not necessarily. Guessing is too risky because you can guess correctly or incorrectly. Instead, we recommend looking at the data. For example, you may remember the news was doom and gloom, but the market rose.
Do not listen to the media when it comes to the market.
The media is driven by emotion. If you do listen to the news to make your investment choices, we almost recommend investing in the opposite direction that the media outlets are reporting.
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