Lead-Lag Report: Christine Benz on Mastering Investment Strategies and Navigating Retirement Planning Challenges
Investors can make a number of mistakes that cost them money. One of the biggest mistakes is to chase a hot stock, sector, or market. By waiting to jump into an asset after a big runup, the chances of a pullback are much higher.
At the wrong point in an economic cycle, it can also mean getting in at the top before a big drop. That could lead to poor returns that take years to recover from.
That’s why investors need a way to analyze investments that are on the rise. It’s important to know if an investment has further upside.
Looking at predictive models can help determine if there’s a long-term trend in place or if investors are simply chasing prices higher.
Plus, investors can lower their risk by adopting a rebalancing strategy. That involves taking profits in assets that have taken off, and using the proceeds to invest in assets that have underperformed.
So an investor with a 25 percent allocation to growth stocks may periodically take some profits to keep that allocation at 25 percent. And the funds could be used to shore up another position that is under its allocation level.
These moves can help lower risk, smooth out performance, and keep investors ready for any market uncertainty.