With the Standard & Poor’s 500-stock index up around 6% so far this year, and around 11% over the past 12 months, the question for regular stock market investors is whether to follow the herd, or run from it.
Right on cue, individual investors have put more new money into U.S. stock mutual funds in January 2012 than in the last 11 months.
U.S. stock market history is full of examples of individual investors buying back into the stock market at multi-year high price levels. Individual investor optimism typically rises at the worst possible time in historical stock market cycles.
Now is not the time to sell everything that you currently own in U.S. stocks. The stock market may in fact go higher from here, and you want as much exposure to that possible event as you can.
The best investment advice is not always “what to buy.” Sometimes the best investment moves to make are “when to sell.”
The best investment management strategy move now may be to take inventory of all your current U.S. stock market holdings. There are surely one or two on your current stock market investments that have not performed as well as the broad U.S. stock market averages, or as well as some of your other current stock market investments.
Now may be the time to sell those laggards and place the proceeds into the safety of the money market. This money can then be reinvested later on when the current stock market volatility settles down.
Smart Minnesota shoppers wait for items to go “on sale” at their favorite stores. Think about your U.S. stock market investments the same way.
Ric Lager
Lager & Company, Inc.
