In case you didn’t notice, the U.S. stock market has been skyrocketing. The Dow Jones Industrial average is hitting all-time highs. This year alone, the S&P 500 has already returned 16 percent.
If you have been sitting in the sidelines by not investing or keeping your money in the bank, you have missed out on some fairly large gains over the past four years. The question now for those individuals is “Should I invest now?” Meanwhile, the question for those in the market is “Should I pull my money out of the market now?”
I’m one of those who is currently “in the market,” but over the years, my philosophy on investing has evolved. In the past, my investment approach was all about buying unique individual stocks coupled with market timing. I would try to buy stocks when I thought the market was “down” and I attempted to sell when I thought the market was “up.”
This approach failed miserably for me in the past. The most obvious reason was that I was not a Wall Street expert. I had a full-time job and barely had time to research companies to determine their financial health.
Over the years, I moved away from individual stocks to mutual funds that track the broader market. I have left most of the work to the mutual fund manager whose sole job is to return shareholder value.
Additionally, I now don’t try to time the market. I consistently invest in the market via my retirement accounts and tend not to worry about the highs and lows of the market. If you look at any 20-year period of the stock market, it handedly beats out any other investment vehicle, including real estate, bonds and gold.
There are some experts who say that the current stock market is due for a correction, but those same experts say the market is undervalued. I’m not sure who is right, but what I do know is that I’m not going to let it affect or control my investment strategy or my emotions.
If you missed the rally and have a long horizon before retirement, it’s never too late to jump in, but jump in with caution. If you’re currently in the rally and have a long horizon before retirement, you should not let the market dictate your emotions.
What is my approach? When it comes to investing in the short term, I try to set it and forget it. However, investing is an individual choice based upon several factors, so your strategy is certainly an individual one. Please seek financial advice for any investment decisions.