Diversification still
matters. One day, this bull market will end.
Provided by Benjamin Bogetto
In the first quarter of 2017, the bull market
seemed unstoppable. The Dow Jones Industrial
Average soared past 20,000 and closed at all-time highs on 12 consecutive
trading days. The Nasdaq Composite gained almost 10% in three months.1
An eight-year-old bull market is rare. This current bull is the second longest since the end of World War
II; only the 1990-2000 bull run surpasses it. Since 1945, the average bull
market has lasted 57 months.2
Everyone
knows this bull market will someday end – but who wants to acknowledge that
fact when equities have performed so well?
Overly
exuberant investors might want to pay attention to the words of Sam Stovall, a
longtime, bullish investment strategist and market analyst. Stovall, who used
to work for Standard & Poor’s and now works for CFRA, has seen bull and
bear markets come and go. As he recently noted to Fortune, epic bull markets
usually end “with a bang and not a whimper. Like an incandescent light bulb,
they tend to glow brightest just before they go out.”2
History is riddled with examples. Think of the dot-com bust of 2000,
the credit crisis of 2008, and the skyrocketing inflation of 1974. These
developments wiped out bull markets; this bull market could potentially end as
dramatically as those three did.3
A 20% correction would take the Dow down into the
16,000s. Emotionally, that would feel like a much more
significant market drop – after all, the last time the blue chips fell 4,000
points was during the 2007-09 bear market.4
Investors must prepare for the worst, even as
they celebrate the best. A stock portfolio is not a
retirement plan. A diversified investment mix of equity and fixed-income
vehicles, augmented by a strong cash position, is wise in any market climate.
Those entering retirement should have realistic assessments of the annual
income they can withdraw from their savings and the potential returns from
their invested assets.
Now is not the time to be greedy. With the markets near historic peaks, diversification still matters,
and it can potentially provide a degree of financial insulation when stocks
fall. Many investors are tempted to chase the return right now, but their real
mission should be chasing their retirement objectives in line with the strategy
defined in their retirement plans. In a sense, this record-setting bull market
amounts to a distraction – a distraction worth celebrating, but a distraction,
nonetheless.
This material was prepared by MarketingPro, Inc., and does not
necessarily represent the views of the presenting party, nor their affiliates. This
information has been derived from sources believed to be accurate. Please note
- investing involves risk, and past performance is no guarantee of future
results. The publisher is not engaged in rendering legal, accounting or other
professional services. If assistance is needed, the reader is advised to engage
the services of a competent professional. This information should not be
construed as investment, tax or legal advice and may not be relied on for the
purpose of avoiding any Federal tax penalty. This is neither a solicitation nor
recommendation to purchase or sell any investment or insurance product or
service, and should not be relied upon as such. All indices are unmanaged and
are not illustrative of any particular investment.
Bogetto Financial is not affiliated with First Heartland Capital, Inc.
Bogetto & Associates does not provide legal or tax advice. These topics are discussed in conjunction with your CPA, Tax Advisor and Attorney.
Citations.
1 -
money.cnn.com/2017/03/31/investing/trump-rally-first-quarter-wall-street/index.html
[3/31/17]
2 - fortune.com/2017/03/09/stock-market-bull-market-longest/
[3/9/17]
3 -
kiplinger.com/article/investing/T052-C008-S002-5-reasons-bull-markets-end.html
[4/3/14]
4 -
thebalance.com/stock-market-crash-of-2008-3305535 [4/3/17]
Financial Health...For Now & Tomorrow
Contact us Today
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
Website - www.bogettoandassociates.com
Telephone - 314-858-1602
Email - peter@bogettoandassociates.com
10805 Sunset Office Drive, Ste. 202
St Louis, MO 63127
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