4 Strategies For A Hot Stock Market

risk toleranceInvestors are definitely in a good mood lately. Who wouldn’t be?

The stock market continues to climb with low volatility. So investors and clients I’ve spoken to recently are not worried at all. I sometimes get nervous if clients aren’t nervous. It probably means everything is going a little too good!

So what can you do during this hot stock market? You still want to make money, but you’re worried the party may come to an end soon.

4 strategies to consider:

1. Review your investments and rebalance. More than likely your portfolio may be out of balance. U.S. stocks have soared in recent months causing other holdings in your portfolio to be underweighted. For instance, other asset classes that underperformed may be under their target percentage of your asset allocation. Therefore, allowing you to sell high and buy low.

I generally recommend that you rebalance at least once per year every year. You may also want to look at your 401(k) portfolio and rebalance it as well.

2. Take some profits. Take the rebalancing process a step further and use the market rally as a reason to weed out some of your investments. It may be a good time to can a few laggards. If they aren’t going up in this market, why hold on to them?

3. Diversify your holdings. Since U.S. stocks have been so hot, it may be time to check out those international holdings again. With the problems in Europe it may just be a buying opportunity. In fact, go a step further and look at using developed markets as well as emerging markets.

4. Donate to charity. Individual stocks that have soared are a good place to start. If you don’t want to take the tax hit, then consider donating to a charity and get the charitable deduction. Oh, and no capital gains! Just consult a good estate planning attorney and tax advisor before you proceed.

As I said in an article last week, the market makes me humble. Just when I think I know where it’s going, it reminds me who is really in charge! Worried about what to do in this Hot Stock Market with your portfolio? You know the drill, write me at david@lexwealth.com, or call me at  (859) 225-2596.