Stock Market Gone Wild

I have no idea where this stock market is going. I thought it would top out long ago, but it seems to still want to go up and up. Rather than discuss why I think it is approaching bubble levels (maybe this one can be called the Obama-bubble), we should take this time to review our current retirement investments and make sure they are properly allocated for the coming year.

This means selling some of your big winners.

I know it hurts to do, these trusty funds/stocks have given you 100%+ returns over the past year (all you holders of AmEx stock know what I'm talking about). It is absolutely essential at this point to take some money out of your big winners and put the winnings into something else. It is the nature of the stock market, yesterdays big winners are tomorrows lackluster performers and next week's dogs. There is no better time then the start of the year to review and adjust your holdings.

To review (this is where some of our reader's choose to skip my post). This is an example of an easy portfolio that can be maintained through Vanguard Index funds. Most company 401(K) plans should have funds that look and behave similarly.

Review your performance for the past year. Pat yourself on the back for having chosen so wisely (pretty much everything did extremely well in 2009). Now rebalance things to look how you want it to for the coming year.

My view? I'm gearing up for inflation. The bond portion of my account is shifting mostly into TIP (Inflation Protected Treasuries). Junk bonds and high yield corporates are going to get hit hard in an inflationary environment. I'm also moving some of my stock holdings into XME which is a metal and mining ETF which gives me exposure to gold, silver, and steel.

I'm even shifting money out of my stock portfolio and into my bonds because I don't like the prospect of 10% unemployment and rising inflation.

The most important thing that I'm doing though is setting up an automatic monthly deposit into my Roth IRA. Automatic deposits are the surest way to get rich. I setup an automatic deposit for my son's college 529, he is almost 3 and now has $2,000 saved away. Do yourself and your children a favor this year and start automatically saving for the future. Chances are you won't notice the missing 50 or 100 dollars, but in January of 2020 you'll be glad you set off on this path.