Dow at All Time Highs – Should You Be Buying?

Most of the analysts were caught wrong footed with their predictions as the markets took comfort from the healing labor market and improving economic conditions. The Dow which had a stiff resistance around the 13000 levels broke that with a big and surpassed it quite comfortably, eventually leading to much higher and unexpected levels of 15,000 + at which the US markets are trading currently.

While most of the retail investors must have missed this rally due to their bitter experiences in the past and must be frustrated waiting at the sidelines, people who had invested consistently, keeping a longer time frame are reaping the benefits big time now. As the markets are surging, so are the portfolios of those prudent investors who decided to invest regularly without waiting for a steep decline and thus trying to time the market.

Coming back to those of you who want to invest in the market but are skeptical of investing at such high levels, perhaps fearing that you might burn your hand. You should still start chipping away at stocks that have good fundamentals and will continue growing at the same or even better rate than in the past. While such stocks would be available at high valuations right now, they are still worth owning. However having said time, it is important that people do not try to go for short term profits as although there are chances of pocketing some good money in a trending market, if there’s a correction around the corner then you might be stuck in stocks that you shouldn’t have been owning in the first place.

The best way to invest right now would be to decide the stocks that you believe in and feel comfortable holding for several years, and starting to buy them on dips. While it is difficult to foresee big falls in the short-term and base your buying on that, it is much easier to keep investing a portion of your investable amount whenever there is a small decline in the markets.

If you do this diligently, even if the markets were to fall steeply in the months ahead, you wouldn’t be deep red in losses. While other investors would curse the markets for trapping them, you will be able to continue to chip away at your preferred picks and build a sustainable portfolio for the long term. On the flip side, if the Dow keeps continuing its stellar run, you will keep benefitting from the shares that you purchased at the lower levels (right now). Though some finance bloggers are pursuing the Sell in May strategy, which may of course work for them depending on the state of their investments, personally I wouldn’t want to sell my holdings only to find out a few months later that the markets have being continuing to run up after some consolidation.

Nevertheless, the choice is still yours and if you feel comfortable with applying some other strategy, you should go ahead and try it. But do remember, currently the market is at all time high levels and it may not be prudent to invest all of your money thinking that you will get a stellar return in the coming months. Things can go bad in markets and people who are overly bullish tend to suffer the most, so play safe. Happy Investing!