Right now is probably the hardest moment to take profits in Apple stock. After all, it just became the first American company to reach the Trillion Dollar valuation and investors are on high alert to see which co. out of Microsoft, Alphabet, and Amazon will reach that mind-numbing milestone next.
Plus, the case can be made that Apple isn't excessively valued (it isn't by any metric I use). I also can tell you that in the portfolios that I manage, tech is a big component. So, I am not walking away from tech stocks, but I do have my opinion, which is to scale back a little, either by rebalancing, reinvesting tech gains into a different corner of the stock market, or just sitting in some cash. After all, you're no mutual fund manager who is required to be fully invested. I've been having this conversation with my clientele and my peers lately.
Have you ever come up with a phrase and immediately after you thought to yourself "hey, that was pretty good"? I spoke with Eric Rosenbaum, editor at CNBC, about how high net worth investors feel about tech stocks. From the article:
Mitch Goldberg, president of Melville, New York-based investment advisory firm ClientFirst Strategy, said the FANG stocks have cleared hurdle after hurdle, but that doesn't mean investors shouldn't cut back and rebalance according to their risk tolerance. "Better for you to do it before the tech sector does it for you," he said. (CLICK HERE TO READ IT)
Please don't misconstrue my words to mean that I am hating on tech stocks. I think the FAANG stocks have long runways for growth ahead of them. Turbulence (to take that analogy one step further) is to be expected when investing in stocks, especially techs. But with valuations very close to either side of a Trillion Dollars, one needs to consider if a lot of that growth is now factored into their valuations.
Here are 5 things you could do right now with your investment portfolio - and become the smartest person in your crew by sharing these tips - to get ahead of whatever stock take-down that comes our way.
- Look at your overall account holdings, including your 401(k) and other mutual fund holdings and figure out how much you have in tech. If the exposure is greater than 20%, it may be time for you to reallocate into different investment options.
- For those of you who use individual stocks and ETF's, use trailing stop-limit orders to protect some gains. This is a way you could ride your stocks higher but put a valve underneath for when they start to slide backward.
- Make sure you are exposed to sectors of the stock market that typically hold up relatively better than high beta (more volatile) sectors like tech and industrials. Consider upping your exposure to consumer staples and healthcare stocks.
- Consider hiding in money market funds until you find something compelling to invest in. Having cash on the sideline is potential buying power.
- Place below-the-market buy limit orders for the stocks that entice you. Make sure a few of those are far below current prices. This way, you'll turn a stock market downturn into your friend. You'll actually start to hope that the next downturn goes even lower so that your buy-limit orders could be filled!
I'm a believer that strategy and process are more important than anything else when it comes to successfully investing based on one's personal risk tolerance, goals and time horizon. These things that I just shared with you are just a tiny fraction of the things I do to guide my clients through all of their life-cycles.
If you don't have a strategy, then I'd suggest you get one. Otherwise, you'll just end up making hasty decisions with your money every time the stock market takes a beating. And tell me, when has anything good ever come about from making a hasty decision?
I started this post by saying that right now is probably the hardest time to take profits in Apple stock. But it wouldn't be so hard to decide if you had an investment strategy already in place. That's my point.
If you're looking for a better way to save, invest, and plan for your retirement, click on the "Let's Talk" picture below to schedule a 15 minute phone call with me.