May 25, 2018

Strategies for Investing in Rising Markets

By Byron Ellis

Photo credit: Getty Images

It is nice when you can experience a great bull run (rising markets), but it could put you in a position where you don’t want to invest more, thinking it may be time for the good market to reverse its positive trend. The problem is that when markets are high and you aren't looking to sell, you might not quite know what to do with your portfolio. You just need to know the strategies for investing in high markets.

Stick to Your Plan

If you have an investment plan then stick to it. Whether it's buying stocks in an IRA or investing your tax refund, it's important to follow your plan and continue to think long term.

Don't Be Afraid to Shuffle Your Retirement Assets

Great markets often lead to profits, but those capital gains can quickly mean you're paying a lot of taxes. A smart trick that investors use in these circumstances is to shuffle around investments that are contained inside retirement funds like an IRA or a 401(k). If you want to capture profits or reduce your stock holdings that have risen, selling inside an IRA is a way to do so without any immediate tax implications. While this strategy is useful in any market, it's particularly useful for high markets where the profits are more substantial.

Don’t Let a High Market Scare you

Just because the market is running high doesn't mean there is no reason to invest in stocks. After all, just because it's more expensive today than it was yesterday doesn't mean it won't be even more expensive tomorrow. If you look back over the market’s history via Macrotrends, you can see that it was “high” many times and many times it has moved higher. If you are investing for the long run, the current level of the market is not that important. However, be careful of market hype. Most investors tend to buy into the market more when it is high than when it is underperforming. Making investments out of emotion or without going through the due diligence is a good way to lose out on the money you are hoping to make.

Make Sure You Diversify

You have heard me say it before and I will say it again: diversification is key … especially when the market is already high. For example, you might have a portfolio that's made up of 75 percent stocks and 25 percent bonds. If stocks go up, you could see a shift to 80 percent stocks and 20 percent bonds. It may be a good idea to let that ride for a bit while the market has strength. However, at some point, going back to your plan and rebalancing back to 75-25 may be a wise move. Just because the stock market is reaching record highs one week doesn't mean it will keep climbing. Sooner or later there will be a downturn, and when that happens your portfolio needs to be varied enough to absorb the impact without losing everything.

In summary, don’t shy away from a high market but don’t get caught in the hype. Stick to your plan and remain long-term oriented.

DISCLOSURE: Investing involves risk and clients should carefully consider their own investment objectives and never rely on any single chart, graph or marketing piece to make decisions. The information contained herein is intended for information only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. Please contact your financial adviser with questions about your specific needs and circumstances. The information contained herein is not represented or warranted to be accurate, correct, complete, or timely. United Capital and your adviser shall not be responsible for investment decisions, damages, or other losses resulting from use of the information. Except as otherwise required by law, United Capital and your adviser shall not be responsible for any trading decisions, damages or other losses resulting from, or related to, this information, data, analyses or opinions or their use.

Equity investing involves market risk, including possible loss of principal. Diversification doesn’t ensure a profit or guarantee against loss. Past performance doesn’t guarantee future results. There are no investment strategies that guarantee a profit or protect against a loss.

Byron Ellis
ABOUT THE AUTHOR

Byron Ellis

United Capital Financial Advisers, LLC d/b/a Goldman Sachs Personal Financial Management (“GS PFM”) is a registered investment adviser and an affiliate of Goldman Sachs & Co. LLC and subsidiary of The Goldman Sachs Group, Inc., a worldwide, full-service investment banking, broker-dealer, asset management, and financial services organization.

The information contained herein is intended for informational purposes only, is not a recommendation to buy or sell any securities, and should not be considered investment advice. GS PFM does not provide legal, tax, or accounting advice. Clients should obtain their own independent legal, tax, or accounting advice based on their particular circumstances. Please contact your financial adviser with questions about your specific needs and circumstances.

Information and opinions expressed by individuals other than GS PFM employees do not necessarily reflect the view of GS PFM. Information and opinions expressed in this article are as of the date of this material only and subject to change without notice.