Investing at an all-time high – five options
Fear & Greed. These are the tug and pull of speculation. It reminds me of the investor’s plea: “Hey make as much money as possible but don’t take any risks.” Why sure bunkie, anything for you.
In all my years practicing my chosen craft one thing, maybe two, are for certain. Fear, let’s use the word caution, is not an investment strategy. Neither is greed. So, let’s say you just came upon a pile of money; you know you should invest it, but the news abounds about the most recent market record. What should you do, and how should you go about it.
- First things first. What’s the investment for? If you cannot answer this question – stop, please, do nothing. Wanting your investment to appreciate is desirable but is not a financial goal. Is the investment today being made for a future college tuition obligation, or retirement, or whatever…? The idea here is that defining the goal also defines the longevity and liquidity needs of the investment and in as much may help define the desired risk profile.
- Dollar-Cost-Average into equity markets – put some of the money to work in a systematic, unemotional, periodic schedule. I read a survey not too long ago that claimed these words are despised by most investors. It seems some folks think dollar-cost-averaging is a default for not being smart enough to know when to invest and just leaving it to chance; as some of you know, it is neither. It is a method for reducing the probability of a catastrophic mistake, market event, or unusual circumstance.
- Diversify. Yes, another cop-out word. However, did you know that there are plenty of asset classes and individual stocks that have not kept up with the S&P 500 this year? For example, small-cap stocks have lagged pretty much all year; until last Friday, that is, when they had a strong rally. If your portfolio were diversified to include small-cap equities, you would have experienced a nice uptick.
- Invest in equities on the down days. Divide your pile into five buckets (20%) or ten buckets (10%) and invest between the 3rd and 7th down day. Or, make up your own down-day rule. Please remember this works better in bull markets, not so much in bearish ones, in my opinion. Oh yes, we are in a bull market – have at it.
- Want to be sophisticated? Or just complicated? Combine 2, 3 and 4. What’s the worst case of using this choice? It keeps you busy.
Bull markets post new records for longs periods of time. If you accept the premise that we are in a secular bull market with very favorable economic tailwinds, the uptrend should continue for a handful and a half more years. Yes, we will have corrections and market moving events.
Doing nothing is not a viable option for a lifetime of investing. Neither is fear and greed. Enjoy the bull, put the money to work. We design investment programs tailored to help achieve individual goals. https://www.dominguezandjones.com/investment-philosophy/
Currently, our portfolios overweighted domestic and foreign equities.
Carlos Dominguez – Portfolio Manager, RJ
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The preceding information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation. Any opinions are those of Carlos Dominguez and not necessarily those of Raymond James. All opinions are as of this date and are subject to change without notice.