Stam­ped­ing Bull Mar­ket May Slow Down … So Be Pre­pared

Calhoun Times - - FRONT PAGE - De­wayne Bowen

As you know, we’ve been en­joy­ing a long pe­riod of steadily ris­ing stock prices. Of course, this bull mar­ket won’t last for­ever – and when it does start los­ing steam, you, as an in­vestor, need to be pre­pared.

Be­fore we look at how you can ready your­self for a new phase in the in­vest­ment en­vi­ron­ment, let’s con­sider some facts about the cur­rent sit­u­a­tion:

-Length – This bull mar­ket, which be­gan in 2009, is the sec­on­dold­est in the past 100 years – and it’s about twice as long as the av­er­age bull mar­ket.

-Strength – Since the start of this long rally, the stock mar­ket has pro­duced an av­er­age an­nu­al­ized gain of 15.5 per­cent per year.

While th­ese fig­ures are im­pres­sive, they aren’t nec­es­sar­ily pre­dic­tive – so how much longer can this bull mar­ket con­tinue to “stam­pede”? No one can say for sure, but there’s no manda­tory ex­pi­ra­tion date for bull mar­kets – in fact, they don’t gen­er­ally die of old age, but typ­i­cally ex­pire ei­ther be­cause of a re­ces­sion or the burst­ing of a bub­ble, such as the “dot.com” bub­ble of 2000 or the hous­ing bub­ble of 2007. And right now, most mar­ket ex­perts don’t see ei­ther event on the near-term hori­zon.

Still, this doesn’t mean you should nec­es­sar­ily ex­pect an un­in­ter­rupted streak of big gains. Some signs point to greater mar­ket volatil­ity and lower re­turns. To nav­i­gate this chang­ing land­scape, think about th­ese sug­ges­tions:

-Con­sider re­bal­anc­ing your port­fo­lio. If ap­pro­pri­ate, you may want to re­bal­ance your in­vest­ment mix to en­sure you have a rea­son­able per­cent­age of stocks – to help pro­vide the growth you need to achieve your goals – and enough fixed-in­come ve­hi­cles, such as bonds, to help re­duce your port­fo­lio’s vul­ner­a­bil­ity to mar­ket volatil­ity and po­ten­tial short-term down­turns.

-Look be­yond U.S. bor­ders. At any given time, U.S. stocks may be do­ing well, while in­ter­na­tional stocks are slump­ing – and vice versa. So, when volatil­ity hits the U.S. mar­kets – as it surely will, at some time – you can help re­duce the im­pact on your port­fo­lio if you also own some in­ter­na­tional eq­ui­ties. Keep in mind, though, that in­ter­na­tional in­vest­ments bring some spe­cific risks, such as cur­rency fluc­tu­a­tions and for­eign po­lit­i­cal and eco­nomic events.

-De­velop a strat­egy. You may want to work with a fi­nan­cial pro­fes­sional to iden­tify a strat­egy to cope with a more tur­bu­lent in­vest­ment at­mos­phere. Such a strat­egy can keep you from over­re­act­ing to mar­ket down­turns and pos­si­bly even help you cap­i­tal­ize on short-term pull­backs. You could in­vest sys­tem­at­i­cally by putting the same amount of money in the same in­vest­ments each month. When prices go up, your in­vest­ment dol­lars will buy fewer shares, and when prices drop, you’ll buy more shares. And the more shares you own, the greater your po­ten­tial for ac­cu­mu­la­tion. How­ever, this strat­egy, some­times known as dol­lar cost av­er­ag­ing, won’t guar­an­tee a profit or pro­tect against all losses, and you need to be will­ing to keep in­vest­ing when share prices are de­clin­ing.

Dur­ing a rag­ing bull mar­ket, it’s not all that hard for any­one to in­vest suc­cess­fully. But it be­comes more chal­leng­ing when the in­evitable volatil­ity and mar­ket down­turns ap­pear. Mak­ing the moves de­scribed above can help you keep mov­ing to­ward your goals – even when the “bull” has taken a breather.

This ar­ti­cle was writ­ten by Ed­ward Jones for use by your lo­cal Ed­ward Jones Fi­nan­cial Ad­vi­sor.

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