With the Dow Jones Industrial Average approaching 20,000 and the ASX All Ordinaries Index reaching its 12-month high, many investors are wondering what they should do from here. Some are wondering if they have missed the run, others are asking if they should take profits at these levels.
The short answer to these questions is that investors should do little different as a result of this milestone level. This is a timely moment to remind investors of a basic but often forgotten quality of investing. Investors should continue to invest with a longer term outlook rather than trying to time the market.
Whether investors enter the market here or if they should take profits here has nothing to do with these milestone numbers. Instead investors should keep in mind things such as the timeframe of their financial goals and their tolerance to investment volatility.
Those saving for a distant goal, such as saving for retirement or their children’s education should look to start investing right away. For those who are aiming to retire soon, they could consider decreasing exposure to growth assets if a short term shock could be detrimental to their retirement goals. Investors could also consider rebalancing portfolios from asset classes that have appreciated into other asset classes to ensure the mix is still in line with their risk profile.
Too many investors are tempted to buy the market during bull markets but flee the market during a correction. This results in buying high and selling low. Instead, investors should keep in mind things such as their investment time horizon and the tolerance to ride market ups and downs. It is better to have a rule based investment approach than to make investment decisions based on emotion.
This information is general in nature and does not take into account any person’s particular investment objectives, financial situation or investment needs. If you are an investor, you should not act on this information. The information is based on assumptions or market conditions and may change without notice. This may impact the accuracy of the information.