You may be familiar with the writing;
"There is a right time for everything:
A time to be born and a time to die;
A time to plant and a time to harvest."
King Solomon of Israel wrote these words of wisdom in the book of Ecclesiastes. King Solomon is known as the wisest and richest man who ever lived. In today’s value, his worth would be around $2 trillion. Maybe we can glean some investment knowledge from his wisdom.
Farmers are familiar with the words a time to plant and a time to harvest. Perhaps as investors we can interpret these words to mean “a time to buy and a time to sell”.
The stock and bond markets went up between 2009 to 2016 with the Fed holding interest rates at 0% and all investors had to do was buy to participate. But there were companies that should have been sold, here are a few: Toys R Us; Chesapeake Energy; Flour; Chicago Bridge & Iron; Mosaic; Pacific Gas & Electric; First Solar; General Motors; Sears; Blockbuster Video; Borders Books, General Electric.
We know the financial markets hate uncertainty and we saw the DJIA fall from 29,575 to 18,246 and with the Fed’s and Congress’s assistance dealing with uncertainty the DJIA has recovered to 24,200 area. Investors that held tight and weathered the storm are feeling better with statement values going up. Investors that had their comfortable level violated went to cash and now they are wondering what to do and they are anxious because they think they are missing out.
I use a simple analogy to explain to investors how to go from cash back into the investments you were in or want to own. When you were young and went to the swimming pool you probably jumped in the deep end (an aggressive strategy). As you got older you probably started going down the steps in the shallow end (a conservative strategy). You do not have to put all your cash back in at the same time, average the cash back in over a period of time so you don’t become a victim of Murphy’s Law. Experts believe stocks and bonds will experience up and down days (technically described as backing and filling).
In conversations with investors I tell them the decision to sell is easier than the decision when to buy back in. Some investors want to buy back in but their comfort level has not been reestablished, they just feel that they are missing out. When I first started as a financial advisor in 1981, investors had a 5-7 year time horizon for their investments. They knew there could be some ups and downs along the way but they looked out years. Today, because of online access; 24/7 media (interpretation) coverage of all topics including worldwide stock markets; etc the time horizon has been shortened from years to months and maybe even days. I believe investors should go back to using longer time horizons for their investment portfolios.
The stock market continues to climb the proverbial “wall of worry”: most companies have reported earnings now and we will wait 3 months to see the 2nd quarter’s expected bad earnings; unemployment numbers are horrifying; recession is still ahead of us; still no vaccine; Congress is divided; new ways to work from home; the survival of small business owners and the list grows daily. Remember the stock market is a 6 to 9 month leading indicator and it is not a reflection of the current economy.
You should review the investments in your portfolio with your financial advisor and determine if they are providing the income stream; growth appreciation or wealth preservation that they were purchased for.
What can you do with your investment portfolio right now? Buy; Sell; Hold
1) You have some investments in your portfolio that have been good but the prices are low and you have some cash so you could consider buying more;
2) You have some investments in your portfolio that have not been good and you might use the opportunity to sell them and clean up your portfolio;
3) You have some investments in your portfolio that are up or down but they still help you achieve your investment objectives, then you just hold them.
A time for everything; a time to buy and a time to sell.
Gary Foose is a Financial Advisor with Baird Retirement Management in Lake Jackson. Baird is located at 208 Parking Way, Lake Jackson. Gary’s personal website is GaryFooseBaird.com. Gary’s email is gfoose@rwbaird.com and his phone number is 800-711-6137. Gary has a Certified Private Wealth Advisor CPWA® designation.
Gary recently achieved his Retirement Management Advisor® designation from the Investments & Wealth Institute. RMA® certification demonstrates Gary’s commitment to enhancing his knowledge and skills to better serve you. The Retirement Management Advisor® program is an advanced certification for financial professionals that provides them with knowledge to build custom retirement income plans for their clients to better mitigate risk and ensure better outcomes.
The information offered is provided to you for informational purposes only. Robert W. Baird & Co. Incorporated is not a legal or tax services provider and you are strongly encouraged to seek the advice of the appropriate professional advisors before taking any action. The information reflected on this page are Baird expert opinions today and are subject to change. The information provided here has not taken into consideration the investment goals or needs of any specific investor and investors should not make any investment decisions based solely on this information. Past performance is not a guarantee of future results. All investments have some level of risk, and investors have different time horizons, goals and risk tolerances, so speak to your Baird Financial Advisor before taking action.