As a wealth advisor I must remain vigilant. I have to continue to stand my watch for potential trouble ahead. I also have a duty to continue to remind you of the risks that are still present in investing. Here are a few reminders for this current bull market:
Take note of your gains. Enjoy the feeling of this strong stock market performance and really let it sink in. I hope we don’t see a decline of nearly 50% again like in 2008. Keep this in mind, there will be bad news at some point, and everyone will try to run for the exit like someone yelled fire in a crowded theatre. So remember the great times we are experiencing now. It may just keep you from cashing out at the wrong time.
Don’t take more risk. Fear and greed are powerful emotions. I saw advisors and clients alike in the 2000 technology run take on more and more risk. Adding equities and not diversifying quite enough. It was a recipe for failure. So don’t get over-excited and increase your equity holdings because of greed. Have a logical reason for doing so.
Don’t cash out. One thing is for sure. The stock market has taught me humility. Just when I think I know what may happen, it goes the other way. This market could go a lot higher. If you cash out and it heads higher you’ll be kicking yourself. Don’t sell because of gut feelings, news headlines or fear. Stick with the plan that you and your advisor have created.
Don’t increase spending. When things are good we all tend to spend a little more. We fool ourselves into thinking that prosperity will continue on and on. Resist the temptation to go out and take on new debt. These good times probably won’t last forever. Stick with your plans and your budget.
Save more. I say it all the time, save your money and one day it will return the favor. I know it can be hard to save. Reduce some expenses if you have to. In a great market like we are having, you’ll reap the benefits as these extra dollars grow.
No one knows how long this bull market will last. These reminders, however, are timeless and apply to every bull market during your lifetime of investing. Refer back to them often, because the next bear market could start tomorrow.