Stocks near all-time highs: Time to act!
(MoneyWatch) The U.S. economy is still described as tenuous and the recovery as tepid, but don't tell that to investors, who have driven large U.S. stock indexes towards all-time nominal (not adjusted for inflation) highs. In fact, the Wilshire 5000 has already reclaimed its nominal all-time high, closing at 15,878 on Jan. 25, 2013, 72 points above the previous record close set on Oct. 9, 2007.
As the Dow Jones Industrial Average closes in on the "psychologically-important 14,000 level" and the all-time nominal high of 14,164, reached Oct. 9, 2007, it's OK to feel good. After all, it's been a long and painful slog from March 2009, when the Dow bottomed out at 6,547.
Experts will guffaw our obsession with round numbers and say that it's just another example of allowing emotions to guide our investing. I prefer to use the round numbers and new records a catalyst for action. After all, isn't it tiring to be on the buy-high, sell low cycle?
Instead of blithely pouring money into the stock market (TrimTabs reports that investors have dumped a record-setting $55 billion into equity-related mutual and exchange-traded funds in 2013), it may be wise to use these market highs to be proactive. Here's what you should do:
- Open your statements
- Review where you stand
- Take a risk assessment quiz
- Re-balance accounts according to your personal goals
- Beef-up cash holdings for any near-term funding needs (tuition, car, house down payment)
If you work with a broker or a financial advisor:
- Schedule appointment to review progress
- Confirm how much service costs
- Review and update your plan
- Consider replacing managed funds with lower cost index or exchange-traded fund
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