Is it Time to Get Out of Stocks?
People are asking whether they should take their recent gains and get out of the stock market. Trying to time markets
like that rarely works out.
In the second week of July in 2011, a huge number of people sold their stock mutual funds, equaling the outflows for
the entire month of May. Dire predictions started to spread again. Some guy selling newsletters (Elliott Wave
Theory) was predicting Dow 1000. So what happened? The stock market bounced back 5.7%, the best week of
the year so far. The quarter wound up being terrible, but now in the spring of 2012, stocks have bounced back nicely.
It’s the same story. Individual investors do a terrible job of trying to decide when to buy or sell stocks, typically
buying after stocks have run up or selling after they have hit new lows.
People have a hard time believing this, but no one can reliably predict which asset classes will move up or down. No
one! So the best idea is not to change your portfolio based on predictions. Instead, diversify long-term investments
over a broad range of asset classes is a good solution for riding out market fluctuations.
Changing your asset allocation is prudent when you go through major life events or you change your goals. If you lose
your spouse, become disabled, or go through some other major life event, you may need to adjust your portfolio.
As you come closer to achieving certain financial goals, you should also consider gradually reducing the risk in your
portfolio. Getting ready to retire or buy a house may mean reducing your allocations for those goals from stocks and
increasing your allocation toward bond and cash investments.
While your portfolio should be rebalanced periodically so that you scale back on assets that have risen sharply in value
and buy more of those that have dipped, sticking with an investment plan for the long haul is the right way to go. If
you are not sure what any of this means, please give us a call.
©2006-2012 Yardley Wealth Management, LLC. All rights reserved.
People are asking whether they should take their recent gains and get out of the stock market. Trying to time markets
like that rarely works out.
In the second week of July in 2011, a huge number of people sold their stock mutual funds, equaling the outflows for
the entire month of May. Dire predictions started to spread again. Some guy selling newsletters (Elliott Wave
Theory) was predicting Dow 1000. So what happened? The stock market bounced back 5.7%, the best week of
the year so far. The quarter wound up being terrible, but now in the spring of 2012, stocks have bounced back nicely.
It’s the same story. Individual investors do a terrible job of trying to decide when to buy or sell stocks, typically
buying after stocks have run up or selling after they have hit new lows.
People have a hard time believing this, but no one can reliably predict which asset classes will move up or down. No
one! So the best idea is not to change your portfolio based on predictions. Instead, diversify long-term investments
over a broad range of asset classes is a good solution for riding out market fluctuations.
Changing your asset allocation is prudent when you go through major life events or you change your goals. If you lose
your spouse, become disabled, or go through some other major life event, you may need to adjust your portfolio.
As you come closer to achieving certain financial goals, you should also consider gradually reducing the risk in your
portfolio. Getting ready to retire or buy a house may mean reducing your allocations for those goals from stocks and
increasing your allocation toward bond and cash investments.
While your portfolio should be rebalanced periodically so that you scale back on assets that have risen sharply in value
and buy more of those that have dipped, sticking with an investment plan for the long haul is the right way to go. If
you are not sure what any of this means, please give us a call.
©2006-2012 Yardley Wealth Management, LLC. All rights reserved.
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Michael J. Garry, CFP®, JD/MBA, owner of Yardley Wealth Management, LLC,
is an independent Financial Advisor who provides Fee-Only financial planning
services and investment management in Newtown, PA.
| Address: 41 University Drive Suite 400, Newtown, PA 18940 Phone: 267-573-1019 Toll free: 877-251-4393 Fax: 267-604-9164 mgarry@yardleywealth.net |