With stocks in the stratosphere, many investors have happily put off rebalancing as they watch their portfolios rise. Those same investors won’t be smiling when stocks fall back down to earth. It could be time to do some strategic selling.
Are you concerned that the stock market may stumble soon? History would suggest that a pullback is highly likely because the stock market, as measured by the S&P 500 index, is up over 336% from March 2009 to late July 2017 (19% annualized). It’s probably safe to assume that the stock market, which has averaged 10% per year since 1926, can’t sustain its current 19% pace forever.
If these skewed figures don’t make you want to examine your portfolio further, consider that we are also in the second-longest and second-largest bull market since World War II, and we are sitting in the middle of the second most pricey market since the 1999 tech bubble (as measured by P/E ratios).
I’d suggest that it is time to take profits!
Although the bull market stats are shocking, you should take profits sensibly and in a measured way, as opposed to letting fear or irrationality dictate your moves.
Taking profits isn’t easy, because it means selling some of the investments that you love and buying some that probably aren’t your favorites. Taking profits now will also mean selling some stocks and buying some bonds. The nice thing, though, is that you will be selling at all-time highs.