Concerned the market might be running out of steam?Submitted by Castlebar Asset Management on June 25th, 2015
A common theme I keep hearing from clients, friends and acquaintances is they feel the stock market is running out of steam. Fellow investors like Carl Ichan and Warren Buffet have also made similar comments in recent weeks. Some are concerned about valuations while others think that this bull market is just long in the tooth. Timing the market is not our forte because we stay committed to our target asset allocation for clients and leave market timing for others.
If you feel things are nearing a top or just want to sleep better at night here are three items to review:
Revisit Your Asset Allocation
Chances are you have not reviewed your overall investment allocation in sometime. If stocks seem a little too high for your liking you can make changes to your investment allocation to skew towards a more conservative investment mix. You could allocate more money to cash or bonds. Looking into international stock markets may be another alternative as well. Diversification is one of your best defenses during a market decline.
Rebalance Your Investments
If you have updated your asset allocation recently and are comfortable with it than you should rebalance to a neutral position. Most investors go years without rebalancing their portfolio and it will drift over time. In the current market you are probably overweight in stocks and it would be prudent to reduce some of your stock funds or holdings and purchase other asset classes. By rebalancing at least annually will help you stay on track with your investment goals.
Financial Needs Over Next Several Years
The final item to consider is your needs in the next few years. If you are planning on purchasing a bigger house, a business or some other significant financial move and some of the money you will need is invested in stocks it is time to take action. Since some of your money needed for this purchase is invested in stocks it is wise to reduce your stock holdings or move that money into a more conservative investment mix. The last thing you want to happen is to see the value of your investments drop and not be able to make your purchase or have to pull money from another account.
Before taking any actions you should discuss you situation with your financial advisor or planner. Reacting based on your emotions usually leads to poor financial decisions. You financial advisor can provide an objective opinion and help educate you on how changes in your investment allocation and market performance will impact achieving your financial goals.
Disclaimer: The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual. To determine which investment(s) may be appropriate for you, consult your financial advisor prior to investing. All performance referenced is historical and is no guarantee of future results.