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3 Reasons Your Stock-Market Hesitancy May Be Unfounded

Image: 3 Reasons Your Stock-Market Hesitancy May Be Unfounded
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By    |   Friday, 29 Sep 2017 10:59 AM

The stock market has hit record highs this year, prompting jubilation in many quarters as investors celebrate their gains.

But the record isn’t instilling a sense of euphoria in everyone. Some investors are jittery, certain that a crash is overdue, but uncertain as to what they should do about it.

Meanwhile, U.S. stocks have held steady at record levels even as concerns about a standoff with North Korea, political mayhem in Washington and timing of the interest rate hikes caused brief setbacks.

President Trump has proposed the biggest U.S. tax overhaul in three decades, calling for tax cuts for most Americans, but drew criticism that the plan favors business and the rich and could add trillions of dollars to the deficit.

“I’ve had numerous conversations with clients who are worried about the market being so high,” says Andrew Denney, founder and CEO of Prosperity Financial Group. “They wonder whether they should invest in the market because they are fearful they could lose money if it takes a sudden turn for the worse.”

Some may have even thought their fears justified recently when the market took a tumble a few days after the violent protests in Charlottesville, Va.

People can always come up with a reason not to invest, Denney says, but trying to predict what they market will do at some future date so you can perfectly time your decision isn’t the best strategy.

Here are three reasons why:

  • It is impossible to time the market. Everyone knows to buy low and sell high, but that’s easier said than done. “No one yet has come up with a good strategy on when to buy and when to sell,” Denney says. “Back in 2009, as we were beginning to come out of the recession, many people were probably reluctant to invest in the market because of the big drop in 2008. But look what’s happened since then. If you didn’t invest then, you missed out on some major gains.”
  • Bull markets don’t die of old age. Nervousness about the stock market often focuses on how many years the market has been so strong. “There seems to be this assumption that just because we’ve had a great market for a long time, it has to come to a screeching end,” Denney says. “But that’s not necessarily so. Bull markets don’t die of old age.” In the past, bubbles are what caused the major market crashes, he says. In the 1920s, it was a stock-speculation bubble. In the 1990s, it was the tech bubble. And in the 2000s, it was the real estate bubble. “There’s not a bubble in the market right now,” Denney says.
  • Time in the market is more important than market timing. The amount of time you have to invest will dictate your returns, Denney says, not market timing. If you are 35, you have 30 years or more to invest before retirement, so you’re less affected by ups and downs. If you’re 60, you don’t have as much time and may want to be more conservative.

“When you try to time the market, you have to make two calls – when to get in and when to get out – and you have to get both exactly right,” Denney says. “That’s why you need to think instead in terms of how much time you have, and to diversify your investments accordingly.”

“Trump’s fiscal package continues to drive markets,” said Societe Generale analyst Guy Stear. “U.S. bond yields have climbed both as a direct response to tax cut fears and as the market’s wider risk appetite returned,” he told Reuters.

He said the sharp rise in 10-year Treasury yields, which hit a two-month high of 2.36 percent on Thursday, was driving the dollar higher.

(Newsmax wires services contributed to this report).

© 2017 Newsmax Finance. All rights reserved.

   
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The record-setting stock market isn’t instilling a sense of euphoria in everyone. Some investors are jittery, certain that a crash is overdue, but uncertain as to what they should do about it.
reasons, hesitancy, stock, market, investors
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2017-59-29
Friday, 29 Sep 2017 10:59 AM
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