The market is up! What should I do?

It might be helpful for perspective on this to read my accompanying article “The Market is down! What should I do?” article.

As noted in that article, we all know that markets go up and down. We should also know that the shorter the time frame you are looking at, the more unpredictable markets are. We’ll often (not as often as we used to because most clients know how we’ll answer) have clients ask us how we think the markets might do in the next 6 months or in the next year, or with an upcoming election, etc. My honest answer when asked this question is “I have no idea.”.

Sometimes that’s unsettling for clients because they think that is our role – to know what markets are going to do. But if I knew that, I wouldn’t be working at all! The truth is no matter how many year end predictions you hear or what commentators say, or what I think may or may not happen……no one knows. That's why it's a market.

So, armed with that bit of uncertainty, know that the times to make decisions about your investments are from a position of strength – when markets are advancing or at or near their highs. Many times, though, investors get lulled into a false sense of security thinking everything is great. Much like when in down markets our job is to think differently, here are some things that we (and you) should think about as markets advance:

Rebalancing. This is discussed in my “Are you out of balance?” article. As markets advance, you may unknowingly be getting more and more aggressive, making you more susceptible to the next decline. Rebalancing in times of strength helps you take some gains and mitigate risk.

Set aside funds you may need in the short run. If you have seen positive markets and are taking monthly payout from investments, consider (for example) setting aside 2 years’ of payout in a cash account. The same is true if you know you need lump sums of money in the short run. Doing so means you don’t have to worry about what markets may do in the short run because you have secured your payout needs.

You can take your Required Minimum Distribution (RMD) early in the year vs. later, again to lock in gains and reduce uncertainty.

Assess your holdings. We can use up markets to look at individual securities to make sure they still match a client’s risk profile and timeframe, whether there are better options and make appropriate changes as necessary.

You can use appreciated stock to make a charitable gift. Doing so directly to the charity can be done tax free to you and the charity (consult your tax advisor).

Reassess your risk level. If you’ve been relatively aggressive and are approaching retirement, it’s possible you would want to go further than a simple rebalance. Depending on your situation, you may even want to reduce your overall risk level for more stability. If so, doing so from a position of strength in positive markets is much preferred to trying to do the same in a down market.

Positive markets can increase your range of choices, which is a good thing. While it’s natural to feel complacent during these times, sometimes they are the times to take actions that can get you through the next down market without panic.