They’re baaaack — the bulls are crashing through the stock market. Makes you want to just get out there and run wild in the streets with the big boys, but according to U.S. News & World Report’s Smarter Investor, , slow down and take a deep breath. We’re talking stocks here, not racing the bulls in Pamplona. In either case, a lack of common sense just might get you gouged.
Stick to your underlying retirement investment plan, columnist Scott Holsopple says, and don’t chase returns:
“You see an asset class or an industry or a company that’s on fire. It looks like it will keep climbing forever. That makes it very tempting to shift a sizable portion of your portfolio toward what’s been rocketing skyward.
“But making decisions based on what’s hot can destroy your portfolio’s diversification, and you could end up taking on more risk than you should.
“Chasing returns is nothing more than an attempt to time the market. And that’s a risky endeavor even for highly educated financial experts; for the rest of us, the risk can be off the charts — definitely not appropriate for retirement investors who have a nest egg to protect.”
And just because the bulls are off on a trot, don’t expect them to be frolicking in the field forever.
What goes up, can go down.
“Even the smallest drop in market returns — or in retirement account value — can shock people after a period of high returns during a bull market,” U.S. News notes.
“So be ready for a little volatility. Be prepared for a slowdown. Understand that we could see an adjustment. These things may not happen tomorrow or next month or in two years. But they will happen, and preparing yourself for the fluctuations of normal market behavior can keep you from panicking when it happens.”
BetterInvesting is a national nonprofit organization that has been empowering individual investors since 1951. Founded in Detroit, the association (formerly known as National Association of Investors Corporation) was born out of the conviction that anyone can become a successful long-term investor by following commonsense investing practices. BetterInvesting has helped more than 5 million people become better, more informed investors by providing webinars, in-person events, easy-to-use online tools for analyzing stocks and mutual funds, a monthly magazine and a community of volunteers and like-minded investors. For more information about BetterInvesting, visit its website at http://www.betterinvesting.org/investing/landing/openhouse/blog/index.html or call toll free (877) 275-6242.