In recent weeks, financial outlets have been reporting record highs for the stock market. As investors watch stock values soar, some may be tempted to reallocate their assets in the hopes of a quick profit — and, in certain cases, these short-term money moves may pay off. But, there’s a lot of risk involved in what ultimately amounts to speculative investing. And, even though the potential reward could be great, so could your potential loss.
Before you call up your broker, read what these Forbes Finance Council members have to say about investment strategies for short-term growth.
1. Have a backup plan ready.
Investing is for long-term results. Advisers take the long view when they are making investment decisions. If your reason to be short-term is to fund a specific goal (e.g., college funding in 18 months), you need to consider the real consequences of a market correction at exactly the wrong time and have an alternative way to fund that goal. – Paul Ewing, Prosperity Advisory Group
2. Invest short-term money in savings accounts and CDs.
If your time horizon is five years or less, your principal is at risk. On average, the stock market experiences a major correction (at least 20% drop) once every five years. These corrections cannot be predicted in advance, so it is wise to avoid them altogether. Stash your short-term money in safe vehicles like savings accounts and CDs. Invest your long-term money for true growth. – Erik Christman, Oxford Financial Partners
3. Find the right allocation mix to meet your goals.
Investors should consider an asset allocation that is designed to meet financial goals. The mix of stocks and bonds in an allocation will be the biggest driver of the investment experience. Based on historical data, market highs have tended to lead to more all-time highs. Attempting to determine the top and changing one’s allocations is what gets investors in trouble. – Josh Fein, AdvicePeriod
4. Don’t speculate; invest smartly.
Stock market highs can be nearly as dangerous as its lows, because investors are often tempted to throw their goals out the window by chasing bigger short-term profits. Before brazenly changing your investment plan, ask yourself if you’re speculating or doing smart investing. If the market swings the other way, financial goals like retirement could be completely derailed by a concentrated bet. – Elle Kaplan, LexION Capital
5. Consider an exchange-traded fund.
In an extended bull market, there are higher highs but also higher lows. The risk of a 10 to 15% correction should not be ignored by any investor. There are always going to be individual companies or stocks that fare better than the norm, even in a correction. A new investor should consider an exchange-traded fund (ETF) such as PowerShares QQQ Trust, which is growth-oriented, with few value stocks among its holdings. – Ibrahim AlHusseini, The Husseini Group
Source:-forbes
