Homepage / Investment / By selling now, investors risk missing an additional 'melt-up' in the market
Google and Facebook are watching our every move online. It's time to make them stop Daymond John tells shy airline passenger: You should have talked to me on the plane South Korea says it has no plans to shut down cryptocurrency trading AMD shares surge as Wall Street analysts say the chipmaker is ‘executing on all fronts’ James Altucher, the face of bitcoin, says he’s happy about Facebook’s cryptocurrency ad ban Pending home sales eke out 0.5 percent gain in December as supply shrinks to record low Uber is testing bike sharing in San Francisco The real source of the internet's problems might be the advertising business Game publisher EA's sales forecast tops estimates, sending shares higher GE will likely be dropped from the Dow, Deutsche Bank predicts Samsung surpasses Intel as world's biggest chipmaker for the first time Apple could be the best of the bunch in this tech earnings avalanche The 9-year stock rally still has 'years left,' says one of Wall Street's most bullish strategists Apple: We would never degrade the iPhone experience to get users to buy new phones Bitcoin headed for biggest monthly drop since January 2015 with nearly $60 billion of value wiped off ADP boosts forecast as new tax law spurs demand China 'will open even wider to the UK,' says Prime Minister Li Keqiang Big market swings are something you’re going to have to get used to, says Wells Fargo The dollar keeps weakening. Is that good news for the world? Apple downgraded by BMO, expects iPhone maker to slash revenue forecast this week SoftBank buys majority stake in Japanese messaging giant Line’s mobile division Rising interest rates cause a 2.6% pullback in weekly mortgage applications Trump's State of the Union address 'less hard' than first feared in Asia Trump vows to protect US intellectual property, without naming China Blockchain technology to boost Microsoft earnings, trader says Fujifilm to take over Xerox and combine it into the joint venture Fuji Xerox Samsung is making chips designed to mine cryptocurrencies like bitcoin There’s a risk of market turbulence, but it’s unlikely to hit until 2019, says Santander chairman We'll see up to a 15 percent correction in 2018, Swiss bank CEO says Japan's biggest messaging app Line is planning to launch a cryptocurrency exchange Quicksilver surfwear CEO missing at sea off the coast of France Venezuela says will pre-sell 'petro' cryptocurrency on Feb. 20 Nintendo ups its Switch sales expectations to 15 million units after profits rise 261% European markets seen mixed amid earnings and economic data The UK wants free trade with China. Beijing has its own goals Santander fourth-quarter net profit down 4 percent on US impairments The man who almost became ambassador to South Korea just warned about US plans for North Korea China's Leshi Internet flags $1.8 billion loss for 2017, citing conglomerate cash crunch South Korea says it uncovered about $600 million in cryptocurrency crimes Asia became less democratic in 2017 Al Gore's investment firm backs start-up created by Facebook co-founder Theresa May says she wants a free trade deal with China Chinese manufacturing weaker than expected in January Webpass is leaving Boston in latest sign of Google Fiber’s shrinking ambitions Samsung posts record fourth-quarter profit Asian shares look set for more declines as Wall Street sells off for a second day Don't count insurers out yet after Amazon-Berkshire-JP Morgan move Amazon's health care move could be a big win for consumer health start-ups Red Hat buys CoreOS, a start-up that sold tech developed by Google Here’s what Amazon told employees today about its landmark deal to deliver better health care Top official resigns after false missile alert in Hawaii Crazy odds: These online traders bet on the chaos of Washington and the Trump administration AMD falls despite beating Q4 estimates Facebook ban on bitcoin ads latest in very bad day for cryptocurrencies Indian man dies after being sucked into an MRI machine while carrying an oxygen cylinder Advice for Jeff Bezos, Warren Buffett and Jamie Dimon from a failed effort to control health costs Toys R Us poor holiday sales cast doubts on its future and could force renegotiation of loan terms The Apple sell-off is a buying opportunity into earnings, says trader Google partnership on mobile cloud services drives up MobileIron shares Facebook is banning all ads promoting cryptocurrencies — including bitcoin and ICOs Amazon's moves in health care over the last year are finally starting to make sense Buffett is getting a second chance to partner with Bezos after missing on Amazon as an investment How Pencils of Promise got a $1 million donation from an anonymous bitcoin multi-millionaire Amazon's home devices could be a key to cheaper health care, tech investor Roger McNamee says Two ex-Google engineers built an entirely different kind of self-driving car Cryptocurrencies join the global financial market sell-off as bitcoin drops 7% A travel agent is trying to charge fees for sunbeds Most of the tax cut windfall will boost buybacks and dividends, not workers' pockets, survey predicts The professor who wrote the book on making addictive technology is having second thoughts Trump's immigration policies are 'economic poison' that will cost taxpayers billions Airbnb trolls President Trump ahead of the State of the Union The iPhone X's $1,000 price tag scared everyone away Drop, a rewards app start-up, snags Airbnb's former head of engineering SEC halts one of the largest 'ICOs' ever as it wades deeper into the murky world of cryptocurrency offerings Passing on sanctions, Trump goes even softer on Russia than expected Buy insurers on dip as new initiative from Amazon, Berkshire and JP Morgan is ‘more bark than bite’: Analyst High schools stock up on Narcan to combat teen opioid crisis in US Apple will finally replace the fax machine in health care Apple is reportedly delaying new iOS features until next year because of quality problems Bond expert predicts a ‘wall of buying’ in Treasurys will protect the stock market Home prices surge to new high, up 6.2% in November Noted tech investor says the sector is not the best place to invest right now Sterling predicted to hit pre-Brexit vote level before the end of 2018 Stocks making the biggest moves premarket: AMZN, BRKB, JPM, AAPL, BX, TSLA & more Bitcoin boom to give AMD earnings a boost, says MKM Partners Apple shares fall again on another report of fading iPhone X demand Trump advisor Cohn: President to focus on $1.5 trillion infrastructure plan in State of the Union Why don't foreign investors take fright more often? The dollar is doing something it hasn’t done since 1987 UnitedHealth, CVS plunge on Bezos, Buffett and Dimon plan to improve U.S. health care Amazon, Berkshire and JPMorgan Chase to team in landmark new health care company Can earnings afford to slow down? 'Enemies of the USA': Russia slams America's list of oligarchs with ties to Putin The app that exposed the location of military bases with a heat map is reviewing its features For his next act, former Amex CEO Ken Chenault turns his focus on Silicon Valley Child experts: Just say ‘no’ to Facebook’s kids app Ryanair agrees to recognize British pilots union for first time Arab states are 'determined' to stick with reforms despite deepening 'frustration', IMF says The US 'oligarch list' is strikingly similar to Forbes’ richest Russians ranking Indian ride-hailing firm Ola expands to Australia to take on Uber

Investment

By selling now, investors risk missing an additional 'melt-up' in the market

With stocks notching new highs like clockwork — and some experts calling the market “frothy” and pointing to signs of a market top — some investors might be considering taking money off the table.

Not so fast, advisors warn.

“People make bad decisions when they go to cash,” said Scott Bishop, head of financial planning at Houston-based STA Wealth Management. “Their guts are usually wrong.”

Investment flows show that investors typically get it wrong when they try to predict which direction the market will head, said Cory Clark, director at Dalbar, a Boston-based market research firm.

In 2016, investors guessed wrong about the market’s direction — such as by selling shares, in aggregate, right before a winning month — in seven months out of the year, according to Dalbar. Over the past 20 years through 2016, after accounting for poor timing of fund flows, the average equity investor has earned 4.79 percent annualized, or almost 3 percentage points fewer than the Standard & Poor’s 500 index each year, on average, according to Dalbar.

“A year ago there was a lot of uncertainty and fear, and concerns over a potential market top,” Clark said. “And we just saw the markets keep on keeping on.”

Investors who sell now risk missing a “melt-up,” such as if stocks quickly notch additional double-digit gains, said Thomas Yorke, managing director of Oceanic Capital Management in Red Bank, New Jersey.

If the market does top out soon, investors who sell run the risk of not getting back into stocks at the right time.

“Most investors do very poorly when selling in anticipation of a correction,” said Bishop. “It never feels ‘right’ to buy back in.”

One of Bishop’s clients went to cash in the summer of 2008 — successfully dodging the market collapse that followed Lehman Brothers’ bankruptcy — but still hasn’t gotten back into the market, he said.

Investors generally experience their worst underperformance, compared with the market, during times of market turmoil for just that reason, Clark said. They pull their money out of stocks and fail to get back in as the market recovers.

Even missing out on a few days of market gains can have devastating effects on an investor’s long-term performance.

An investor who stashed $10,000 in a portfolio tracking the Dow Jones Industrial Average at the end of 2001 and held on would have had $28,698 by the end of 2016, for a total return of 7.28 percent annualized, according to Putnam Investments. By missing out only on the Dow’s 10 best days during that period, the investor would have ended up with just $14,697, for a total return of 2.60 percent annualized.

“Investors should stay the course,” said Ryan Fuchs, a financial planner at Ifrah Financial Services in Frisco, Texas. “If you have a plan in place that is well thought out and appropriate for your situation, you should stick to it through ups and downs.”

Instead of liquidating holdings, investors may consider rebalancing both to lock in profits and to bring their asset allocation back in line with their long-term objectives, said Tom Manning, chief executive officer of F.L. Putnam Investment Management, based in Wellesley, Massachusetts.

In addition to rebalancing their overall stock-to-bond allocation, investors can consider selling shares of individual stock positions that have performed well and investing the proceeds in defensive stocks, said Yorke. For example, he is trimming clients’ allocations to FAANG stocks and buying exchange-traded funds that invest in defensive dividend stocks, he said.

For investors who are very worried about the market or about current events, it might also be a good time to reassess overall risk tolerance, Manning said.

“If people are losing sleep over the market and the drama that’s playing out in Washington, they likely have a greater allocation to stocks than they can stomach,” Manning said.

Of course, investors who are losing sleep about the market’s big gains are probably in the minority.

“It’s rare that a client with a successful investment calls you and says ‘Gee, it’s time for me to get out,'” Yorke said. “Generally when that happens they just want to ride it forever.”

Source: Investment Cnbc
By selling now, investors risk missing an additional 'melt-up' in the market

Comments are closed.