Stocks had an extraordinary run in 2016 and it is becoming stranger every day. The S&P 500 started with an extremely bad two week beginning in stock market history and then witnessed all the three indexes crashing in excess of 10 percent from their December 31, 2015 close. However, the same index staged its sharpest rally within the quarter in 83 years. It finished a little higher. The US stockmarket then went to a spin with Brexit went lower. The markets are again coastintg at peak highs on the S&P 500 and Dow Jones Industrial Average.
Being patient helps
The global uncertainty and volatility have left many a investor wondering about the future. Experts, however, are of the opinion that investors should be patient and not deviate from what they are actually doing. They warn about curbing the urge to click “sell” button in the brokerage account simply as a few stocks in the portfolio are conquering new highs. Investors must not be tempted to sell automatically with the rise of the stock market. The valuation of the stock market has the tendency to go up over a longer period of time. It is an excellent feeling to ride the rising market. Do sit back and enjoy if the fundamentals of the stocks have not altered.
There are other factors at work too. Holding stocks for a longer period of time (excess of 366 days) means that you pay noticeably lower tax rates imposed on longer term capital gains when compared to the tax rates linked with ordinary income from asset sales in the short term. The result is a zero percent tax rate of capital gains for people earning money in the 10 percent to the 15 percent tax brackets for ordinary income.
You should also continue to buy regularly. Add stocks to the existing investment portfolio even when the stock market is at record highs. This may seem odd, but if you are buying stocks of high performance companies, then you can make profits. Start by adding the money to investment portfolio and then regularly purchasing the stocks . It will permit you to average the dollar cost into the holdings. This strategy will assist you to achieve a comparatively alluring cost basis of the companies which you have in the portfolio. This will reduce emotional factor of so-called “timing the market”. The latter is impossible to achieve over a longer period of time.