Did you miss the boat?
The stock market is now positive for 2016 to the dismay of many. Did you miss the boat? Did you abandon your ship in January? Is it too late to get back into the market? The Dow Jones Industrial Average is now up 14% from the January 20th low and has climbed over 2,100 points over the last eight weeks. The rebound in the stock market has been fast and furious.
In January, investors sold billions of dollars’ worth of stock and decided to seek refuge on the dock while waiting for the storm to pass. A few brave souls left the safety of the dock and decided to buy during the depth of the storm. The riders of the storm were rewarded for their bravery.
What do you do if your ship left you on the dock because you were too timid to venture out into the raging storm? Should you chase the market and start to buy stocks again? Here are a few suggestions for those of you who were left a shore waiting for the storm to pass.
During the aftermath of any storm it is a good idea to reassess your situation. What are your financial goals? What is your time horizon? If you have more than three years before you need your money, then you should continue to purchase great companies.
What is your current allocation? Did missing the rebound in the market leave a gaping hole in your equity allocation? If so, then you should add stock to your account to complete your overall asset allocation.
Are there sectors in the stock market that may help you achieve your long term goals? Is it time to add healthcare, energy or financials to your portfolio? How about small or international companies? If you are missing a few sectors, then it is time to increase your equity exposure.
You can wait patiently for the next storm to arrive. As any sea captain or sailor knows there is always another storm on the horizon. When the next storm arrives you can take advantage of the displacement of prices and acquire great companies at lower prices.
It may be time to rebalance your portfolio. By rebalancing your portfolio, you can clean up your portfolio. When you rebalance it will bring back your accounts to their original asset allocation.
Is it time to chart your financial plan? A financial plan will be your radar and help guide you through the nastiest of financial storms.
The buy and hold model still works so sometimes the best strategy is to batten down the hatches and hold on for a wild ride. When the sun rises in the morning you will be glad you stayed the course.
Investing through a storm is never easy. In a raging storm or a calm sea it is best to navigate the financial waters with a financial plan. A financial plan that is tailored to your needs will assist you in times of distress and help you from abandoning ship.
He that will not sail till all dangers are over must never put to sea - Thomas Fuller .
Bill Parrott is the President and CEO of Parrott Wealth Management, LLC. www.parrottwealth.com.
Source: TDA Think Pipes.
3/19/16