Investing: Safely riding the bull market
With the Dow topping a record 22,000 last week, “Main Street investors might be wondering if it’s too late to jump on the bull market bandwagon,” said Adam Shell in USA Today. Unfortunately, there’s no easy answer. The economy looks strong and corporate profits have been on an upswing, signaling that the bull market has even more room to run. On the other hand, stocks are already trading at historically high valuations, and it’s not clear how much higher they can go. Investors should ask themselves if they’re “looking to book a fast profit or build long-term wealth.” Timing the market is always going to be a gamble. But “investors with time to ride out any short-term market storm should not rule out getting in the market now.”
As one record is set after another, it’s all too easy to be “lulled into a nowhere-to-go-but-up kind of feeling,” said Susan Tompor in the Detroit Free Press. U.S. stock funds gained 10.2 percent on average for the year through July 28, compared with 5.9 percent for the same period last year. All the more reason for investors not to let their guard down. The market has now gone about 17 months without a 5 to 10 percent drop in stock prices, “about three times longer than what’s typical.” It’s not a question of whether a correction will happen, but when.
“The dilemma now, at least for Baby Boomers nearing retirement, is when and if to take some money off the equity table,” said Suzanne Woolley in Bloomberg.com. The stock market’s seemingly endless upward climb has some brokerages urging retirement savers to make sure they haven’t invested too much of their nest egg in stocks. For someone who wants to retire in 10 years, Fidelity recommends holding 64 percent in stocks. But about 1 in 4 Boomers holds equity stakes that are 10 percentage points higher (or more) than the recommended allocation, according to Fidelity’s research. That’s fine for investors with plenty of time to weather the market’s ups and downs, but it’s a risky place to be so close to retirement.
Investing is never easy, even when the market is surging, said Russ Wiles in the Phoenix Arizona Republic. A broadly diversified portfolio should include stocks, as well as assets that don’t move “in lockstep with the market,” like bonds, cash, and commodities. That way you’re able to take advantage of market upswings—like the bull market of the past eight years—while cushioning against the inevitable declines. It’s smart to check in on how your assets are allocated from time to time, even in the middle of a rally. “When the next bearish phase arrives for the stock market, you’ll be glad you did.” ■