Have you ever tried to merge? If you live around here, you know there are plenty of merge lanes on Ritchie Highway. You can merge onto the highway using the lane closest to you, but a lot of the time, people wait for all three lanes to be clear just to merge into the merge lane, which has been open and available the entire time. This drives me crazy.
You can use this as an analogy to the market and when either to buy in or sell out. Rarely do I receive calls from clients wanting to buy when the markets are low or “bad” or requests to sell when the market is up or “doing well.” In fact, the calls I get regarding buying or selling are the opposite of this. When the market is down or bearish, I get requests to sell. When the market is up, I get calls to buy.
Human nature tells us that this makes total sense. From an investment standpoint, this is the opposite of what one should try to do. When the market is up significantly, it goes against every fabric of our being to sell. What if the market continues to go up? “I’ll miss that upside” is something clients will tell themselves. Subscribing to the adage of “buy low, sell high” sounds easy enough, but it can be so hard. Kind of like merging onto the merge lane. Sounds easy but is clearly difficult for some people to do.
The S&P 500 was up 6.47% in June, bringing the year-to-date return to 15.91% through late July. Most investors might look at this as the market being up. We are not in a broad market upsurge. It’s a targeted market focusing on specific companies and sectors. Artificial intelligence is coming on strong this year, and I think this will continue into 2023 and 2024. It is yet to be determined if the performance created by artificial intelligence will trickle into other sectors and create a broader market increase.
The question to ask is whether we want to buy in or sell out based upon the performance or the market thus far this year. A conversation with your financial advisor can help you address this question. If you think about things using my analogy above with the merge lanes into Ritchie Highway, it’s a much easier merge or you can wait for all three lanes to become available. However, it’s quicker and keeps the flow of traffic moving if you simply pull into the merge lane that is right in front of you.
Waiting for the broader market to improve is like waiting for all three lanes to become available. Pulling into the merge lane is jumping into the market now while things are going well. Determining the right approach is going to be unique for all of you.
I do know one thing is for sure: pulling into the merge lane when available is going to make the driver behind you very happy. That is particularly true if that driver is me.
The views stated are not necessarily the opinion of Cetera and should not be construed directly or indirectly as an offer to buy or sell any securities mentioned herein. Due to volatility within the markets mentioned, opinions are subject to change without notice. Information is based on sources believed to be reliable; however, their accuracy or completeness cannot be guaranteed. Past performance does not guarantee future results.
Jason LaBarge, financial advisor and president of LaBarge Financial. 7 Riggs Ave. Severna Park, MD 21146 443-647-4321.
Securities and advisory services offered through Cetera Advisor Networks LLC, member FINRA/SIPC, a broker dealer and a registered investment advisor. Cetera is under a separate owner named entity.”
All investing involves risk, including the possible loss of principal. There is no assurance that any investment strategy will be successful.
Investors cannot invest directly in indexes. The performance of any index is not indicative of the performance of any investment and does not take into account the effects of inflation and the fees and expenses associated with investing.
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