May 6, 2007, 10:57 am

Keep cash in your investment portfolio

by: The Financial Blogger    Category: Investment, Market and Risk
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I keep on telling people to invest in the stock market and now, I’m telling you to just put your money on the shelf. Am I making sense or I’m just good for vacation? I think both! Honestly, you should definitely consider this advice: sell your profitable stocks and do nothing for now!

The Canadian and US stock markets have never been that high since 2001 and everybody keeps on buying. The profits, the growths and the goods news keep on popping up and stock markets are sky rocketing. Why should you sell then? It is probably the right time to buy. WRONG! This is why people keep on loosing money years after years.

Buy low and sell high. Although, everybody knows that, nobody is doing it! If you are making profit on your investment, sell them tomorrow morning. You will take your profit at the right time, at the summit.

If you keep sufficient liquid assets in your investment account, you will be in a better position to buy when the market will drop. It is always hard to get rid of your favourite stocks but it will feel good when you see that you are actually cashing your money in…specially when the same stock will drop in a few months.

The technique behind all this is fairly simple. The stock market might keep on rising for 2007 and maybe even for 2008. However, it will surely slow down and will start to decline shortly. That should give you enough time to rearrange your portfolio and wait for the market to crumble again.

Start protecting your gain by selling your high performance stock and don’t reinvest your money yet. Keep it as cash or liquid fixed income for the time being. You can surely leave some investments in Blue Ships or solid companies. Take a deep breath and look at the market for the next correction. You may make some good money at that point.

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Comments

by: karen stankus | October 6th, 2008 (2:11 pm)

I am a very small investor, and I live on social security. I get just enough from my investments to live on. How do I know whether my portfolio is the way it should be, and not what is good for my broker and his company. I have put my trust in my broker, but am wondering if I should have my portfolio checked out by someone else. Any comments would be appreciated. Thanks

by: The Financial Blogger | October 7th, 2008 (6:51 am)

Hey Karen,

I suggest you have a good discussion with your broker first to review your investment strategy. Then, you can always bring your statement elsewhere and ask for a second opinion.

They will obviously try to transfer your investment account but there is nothing forcing you to do it. If they don’t bring any valid points (that you can verify with your own broker later on), this means that you have a good strategy 😉

Investment is based on trust. If you feel that you can’t trust your broker, this is where you have to start looking elsewhere.

Cheers,

FB.