A Historic Stock Market Week: Terminate Your Weak Positions?

The current uptrend of the stock market is widely believed to have begun on March 6, 2009. That means that on Wednesday of this week the current stock market cycle will have its fourth "Birthday" of doing great things.  But another big anniversary of the stock market was back on October 9, 2007. That is the day that the Dow Jones Industrial Average closed at an all-time high level (as of that date) of 14,164.

Just this week on March 5th, the financial media made a huge deal out of the new all-time record Dow Jones Industrials close of 14,254. The media over-hypes any financial event and completely blows it out of proportion as often as possible.  (Remember the Fiscal Cliff last December?  Have you heard about the Sequestration that began last week on March 1st and would end the world as we know it?)

In spite of all these overly hyped scary financial media events, the U.S. stock markets have gone straight up in the last few months. I believe this was mainly due to the fact that the financial media was "cheerleading" the market the entire time.  Whenever the U.S. stock markets have all-time high events, or birthdays, it is a good time to take a look at what makes up your current stock market investments.  An even better exercise is to ask yourself, “Why do I own this stock or stock mutual fund.”

The current stock market advance may continue, or it may run out of momentum any day now. The most important investment management strategy now is to have a PLAN in place for each event.  If the stock markets continue higher, your investment management strategy should continue as planned.  In the last four years, there is a good chance that you may have recovered the majority of any stock market losses that you had previously.

If the stock markets begin going down, that is where the plan comes in handy (and also where a lot of investors fall short). You don’t need to think about selling everything that you own in the stock markets now. Instead you need to take a close look at any stock market investments that you own that have not kept up with the overall stock market benchmarks.

Most Chicagoland stock market investors I meet have one or two individual stocks or stock mutual funds that have not kept pace with the recent stock market advance. For many reasons, some of their stock market investments have not worked out as well as others.  With the stock market now at multi-year high price levels, now is a good time to sell those lagging stock market positions that you currently own.

On this historic stock market week, give yourself a gift.  Consider selling your worst stock market positions now, hopefully at a gain.

Cheers, Ed Downey.