One of the key principles of investing has always been to “buy low and sell high,” and while this mantra sounds simple in its message for investors, many do it yourself investors often find themselves buying into the tail end of a bull market and selling assets when it is less advantageous to do so – a trap which has derailed many long-term investors’ dreams of building that giant nest egg for retirement sought by so many, and realized by so few.
The tendency to “let it ride” and hold on to “forever” stocks during market downturns is a solid investment strategy; that said, having the cash available to take advantage of said market downturns is an entirely different thing, and the best investors will manage their cash position accordingly to be in a position to take advantage of any market downturn, at any time.
With valuation multiples nearing all-time highs, the prudent advice many money managers are now giving clients is to trim very profitable positions in favor of cash – having a larger than usual cash balance in one’s account is one of the best ways to hedge against a potential market correction or bear market, a situation which many believe to be right around the corner.
Trimming a few positions which have doubled or tipled, thereby re-balancing a portfolio to the intended ratios set out initially (while factoring in a higher percentage of one’s holdings for cash or cash equivalents) is something every investor should consider in today’s market.
Invest wisely, my friends.
