Avoiding The Hot Performance Chase

When it comes to investing your money in the stock market, Matson Money and co-advisers who follow the Matson philosophy consistently advise investors to stay diversified and focus on the long-term because what could be ‘hot’ today may be, as the rock group Foreigner might say, “cold as ice” tomorrow. Given the hype around the S&P’s recent record-breaking performance, it’s important not to chase after hot performing picks for that limited time rush. It should be noted that not all investment strategies are the same, but Mark Matson can share his opinion on what to look out for from his recent appearance on After The Bell airing on Fox Business.

Trying to predict the future on short-term picks is always a losing game.  Sometimes, investors can be emotionally driven to make certain changes to their portfolios because the outlook on the market can bring feelings of prosperity and what former Federal Reserve Chairman Alan Greenspan called “irrational exuberance” with respect to the future value of  equities. However, letting emotions play a factor in managing your portfolio  can be detrimental. Strategic portfolio management requires  looking at the bigger picture.

It can be a great thing that the S&P and Dow are at all-time highs, but investors should still seek out microcap stocks and international stocks to diversify and rebalance portfolios. This means buy when the market  is down and ignore  emotions and instincts because they can cloud your judgment. Matson’s tip:  Only buy the stocks that are down; ignore  the ones that are up.

And, speaking of long-term picks, Matson is surprised that some investors during the past year appear to have forgotten the fundamentals of investing: owning equities long-term, diversifying and then rebalancing your portfolio. Equities should generally be held for 20 to 30 years.  Gambling,  forecasting or attempting to predict  short-term performance can seriously erode the value of your portfolio.. Matson also suggests investing in  small companies because they  have the potential to offer about 3 to 4 percent more  return compared to growth stocks. Not all stock market strategies may work and it should be noted that this is not a guarantee of positive gains.

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