Sunday, March 03, 2019

What if Stock Market Gains of January and February Continue?

The S&P has returned an average of 6% each month for January and February 2019.  If the S&P continues to average 6% for the remaining months in 2019, the total return for 2019 will be about 100%.   Amazing.   Of course, the probability of the stock market returning 6% per month for the next 10 months is very low. 

Here's what I'd do if it did happen:

  • Convert my daughter's College 529 account to  100% cash/CDs.  She's four years away from college, so I would want to lock in the gains.   
  • Cash out of at least 50% of my stock investments.   That way, I will have taken my principal out and only left the profits invested.  In other words, I would only be risking "house money."
  • Hedge against a significant correction.  I would likely do this by purchasing put options, but I might short some stocks also.
Again, it is highly unlikely the market will advance 100% in 2019.   However, if it does, I will have a plan to protect our retirement and college funds.

For more on New Beginnings, check back Sundays for a new segment.

This is not financial or investment advice. Please consult a professional advisor.

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