The stock market had an exceptional year, with impressive gains across major indices. The S&P 500, Dow Jones Industrial Average, and Nasdaq all experienced significant growth. With such positive returns, investors may wonder what steps they should take. Here is some valuable advice from financial experts and advisors on navigating a soaring market.

Despite witnessing extraordinary highs in their portfolios, investors are advised against cashing out due to the market rally. Marguerita Cheng, CEO of Blue Ocean Global Wealth, emphasizes the importance of time in the market over timing the market. Over the past two decades, the S&P 500 has generated an average annual return of 6%. However, those who attempted to time the market by missing the 20 best days during this period would have seen their return shrink to a mere 0.1%, according to Charles Schwab’s analysis. It is crucial to recognize that the market often continues to rise, potentially reaching even greater heights in the future.

While the recent rally may be tempting, investors should exercise caution before pouring more money into their investments. Ivory Johnson, founder of Delancey Wealth Management, advises against chasing the market. Retail investors frequently become excessively bullish after a significant market move, resulting in turning a potential win into a loss. It is essential to approach investment decisions rationally, considering long-term goals and risk tolerance.

To alleviate concerns about the market’s future and the possibility of a recession, it can be helpful to zoom out and evaluate historical stock market performance. According to Steve Hanke, a professor of applied economics at Johns Hopkins University, stocks have provided an average annual return of 11% between 1900 and 2017. Even after adjusting for inflation, the average annual return remains at a respectable 8%. Understanding this long-term trend can provide reassurance and help investors maintain confidence in their retirement investments.

For investors with retirement-focused portfolios, it is generally advisable to stay the course unless there are extenuating circumstances. Retirement funds are intended for long-term growth, with the expectation that they will not be accessed until after the working years. Thus, it is crucial to resist the impulse to make drastic changes based on short-term market movements.

In the case of non-retirement investments, such as stocks held in brokerage accounts for over a year, there may be situations where it makes sense to redirect profits. Sophia Bera Daigle, founder of Gen Y Planning, suggests considering using profits to pay off debt or build sufficient emergency savings. Financial advisors typically recommend individuals set aside three to six months’ worth of expenses in an emergency fund.

Just as investors should review their risk tolerance and make adjustments in times of market decline, the same applies during a rally. Ivory Johnson advises substantial consideration of risk tolerance and time horizon. Circumstances may have changed, and it is crucial to align investment strategies accordingly.

Dramatic market fluctuations offer an opportunity for investors to rebalance their portfolios. Cathy Curtis, founder and CEO of Curtis Financial Planning, suggests that the recent rally may have caused an overweight allocation to stocks compared to bonds in some portfolios. If an investor desires a 70% allocation to stocks and 30% to bonds, they may need to sell some stocks and increase the bond portion accordingly.

Navigating a soaring stock market requires careful consideration and strategic decision-making. While it is tempting to cash out or pour more money into investments during a rally, it is important to remember the significance of time in the market. Historical data shows that stocks have consistently outperformed other asset classes over the long term. Investors should assess their risk tolerance, review their investment goals, and make any necessary adjustments to ensure their portfolios remain aligned with their financial objectives. By staying informed and making sound investment decisions, investors can navigate a soaring stock market successfully.

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