As markets continue pushing toward all-time highs, some investors are seeing their portfolios grow larger than they ever expected.
For many, that prompts two questions:
- With so much market growth, how do I lock in these gains and ensure I won’t lose them?
- Should I be taking my proverbial chips off the table?
In approaching these questions, it’s critical to remember that nobody knows what the market will do next.
We’ve said it before and we’ll say it again – just because the market has gone up doesn’t mean that it’s immediately going to go down. The laws of physics don’t always apply to financial markets. While the threat of volatility and market crashes is always present, there’s no reliable way to time when the next one will come.
Since markets can’t be timed, your investment allocation should continue to be determined by your own financial situation, rather than by some expectation of what you think markets will do.
Few people will be able to meet their financial goals by putting their current nest egg in cash and using it to fund expenditures for the rest of their lives, so future market growth will continue to play an important role for their financial plans. As long as ongoing withdrawals are a modest percentage of the portfolio value, retaining market exposure will be a key component of long-term financial success.
It would be comforting if we knew exactly when the market was going to go up and down, but we don’t. That presents risk, and risk is what we are compensated for when we get market returns.
What we do know is that, given enough time, markets go up as the global economy grows. They don’t go up every day, or every month, or every year. But if your money is there to support you for the rest of your life, then that’s a time horizon which calls for market exposure to reap the rewards.
If you’re considering taking chips off the table now, that decision should be prompted by the realities of your financial situation, not by an attempt to time the markets.
If you’d like to discuss your portfolio’s market exposure, contact us so we can help determine if it is right for your situation.
