Have you heard of Jeremy Grantham, a legendary investor and founder of investment firm GMO? Well, he's warning us of an "epic bubble" in his article, Waiting for the Last Dance.
He goes on to say that the decade long bubble has fully matured and that "extreme overvaluation, explosive price increases, and hysterically speculative investor behavior will be recorded as one of the great bubbles of financial history..." So, OK. Even if he's right, what should you do about this?
If you're already invested, stay invested.
Selling on fear and panic won't get you where you want or need to be! Market timing doesn't work most of the time.
As Coach Bradley put it, if you invested $10K in the S&P 500 from Jan 1, 1999 to Dec 31, 2018, your investment would be worth $29,845 if you stayed fully invested. If you missed the top 10 days of performance over this 20 year period, your account would be worth $14,979. If you missed the top 30 trading days over this period, your account would be worth $6,316.
Coach Ilene also shares that radical moves in portfolios almost always end up being a mistake. It's better to make small tweaks, prepare for a potential drop (which usually corrects decently) and be ready for new opportunities. As businesses change, we can then begin to identify those companies that will be better poised to grow.
The market is like a roller coaster...
If you buckle up and ride it out, you will most likely end up fine. But if you try to hop in or out of it while it's twisting and turning... well, good luck to you!
If you're uncertain about the future but want to keep investing, go with Coach Vineet's suggestion to dollar-cost average. That means to contribute a set amount of money on a regular (e.g., weekly, monthly) basis into your portfolio, regardless of market conditions. It's a simple way to make consistent contributions into an investment account without trying to predict when the market's going up or down.
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