With the Dow Jones Industrial Average over 27,000, the S&P 500 index moving past the 3,000 mark for the first time; the Nasdaq composite likewise shattering its previous record, closing above 8,200, the mood in Wall Street is almost giddy. But the reasons are obvious for everyone to see – Federal Reserve chair Jerome Powell is all but certain to lower interest rates in end July, just months after threatening rate hikes all year.
But, the U.S. is still dealing with a trade war, trouble brews at the Mexican border, massive debt is a constant worry and the near certainty of election season acrimony awaits – all of which could derail the bull market that shows no signs of slowing down.
Given this backdrop, how does the average investor play the market?
Future Wealth’s View
One thing is certain – Investors simply can’t afford to make oversized bets on individual securities. Such a strategy is not advisable even in other times but definitely not now. Neither is it prudent to withdraw from the market and go into cash. In many ways, the answer lies in what stage of life you’re in.
If you are at a point in life where the money you are investing is for retirement that may be over 10 years away, then leave the portfolio alone and go do something else, like surfing or painting. On the other hand, if you need the money in less than 5 years, it may be time to begin shifting to bonds and cash from stocks. If you expect to need the money in 5-10 years, shifting to less risky investments whether the markets takes a correction or not, would be a judicious strategy. Whichever strategy you choose, stick with it and don’t fall into the trap of “if I had done this or if I had done that”.
In the early 2000s, when Kenyan runners were winning all the long distance races from the 10K to the marathon, American coaches believed it was because these runners were training at altitude in Kenya. And so, many American runners tried a similar strategy, but to no avail. Finally, the Kenyan coach revealed the secret of the Kenyan runners – “It is the attitude, not altitude”.