With markets trading near record highs in January, we've created a list of three investing tips for 2017. These tips will help you navigate a market that continues setting new highs while focusing on only the strongest stocks on the market.
Stocks have been red-hot to start the year. The Nasdaq closed at a record Tuesday for the fourth consecutive session. The tech-centric benchmark closed up Tuesday for the sixth straight session and is now up 3.11% so far this year.
The blue-chip Dow Jones Industrial Average is sporting a 0.96% year-to-date gain, and the broad-based S&P 500 is up 1.55%.
The iShares Nasdaq Biotechnology Index (Nasdaq: IBB) is up 8% this year after a punishing 22% decline in 2016 because of drug pricing scrutiny.
Meanwhile, financial stocks are up roughly 17% since Election Day. That makes them the best-performing sector by far in the S&P 500. Talks of regulatory rollbacks that will benefit the sector sparked the rally.
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And oil prices recently traded at 18-month highs, pulling energy stocks higher.
The consensus view among economists and analysts is that stocks will continue to rise this year thanks to signs of a strengthening economy, prospects of fiscal stimulus, and proposed generous tax cuts under president-elect Donald Trump.
Still, many investors worry that the current bull market - the second longest in history - is running out of steam.
"Worrying about things that can derail the markets is a natural reflex based on the past," Money Morning Chief Investment Strategist Keith Fitz-Gerald said.
"The far better - and more profitable - approach is to think about where they're going," Fitz-Gerald continued. "That way you can put your money in the right places ahead of time instead of constantly chasing a train that's left the station, like most investors."
Fitz-Gerald expects markets to run sharply higher this year, but with pullbacks along the way. He believes the potential for a correction is highest during the second half of 2017, after the inaugural Trump bump has faded.
As always, Fitz-Gerald says managing expectations is critical and potentially very profitable.
Here are Fitz-Gerald's top three investing tips for 2017
The 3 Top Investing Tips for 2017
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Invest in Unstoppable Trends
Unstoppable trends are backed by trillions of dollars in spending that Fitz-Gerald says "Wall Street cannot hijack, the Fed cannot derail, and Washington insiders cannot stop."
These trends include: Demographics, Scarcity/Allocation, Medicine, Energy, Technology, and War/Terrorism/Ugliness, which sadly remains a high-growth industry.
"More billionaires have been created around these six trends than any other trend not on the list in recorded history," Fitz-Gerald said. "Keep every one of these trends at the top of your mind so you can tap into the potential created by trillions of dollars on the move."
Buy Only the Best Companies Making "Must-Have" Products and Services
But make sure these companies have rock-solid balance sheets, top-notch management, and brands that can compete globally.
Think tech giants like Amazon.com Inc. (Nasdaq: AMZN), Alphabet Inc. (Nasdaq: GOOGL), and Facebook Inc. (Nasdaq: FB). All stand heads above their nearest competitors.
Manage Risk with Laser-Like Intensity
Fitz-Gerald explains that simply "letting your winners run" isn't enough to ensure profits. Investors must "buy low and sell high" using well-proven profit targets and trailing stops.
Figuring when to buy, sell, and hold individual stocks is difficult to determine. And studies show that when investors try to time the market, they bet wrong. Another problem with buying and selling stocks quickly is transaction costs.
Look at fundamentals like earnings, the investing climate, and the outlook for a stock and its sector.
Don't overreact to bad news, and make sure your portfolio reflects your capacity to withstand market gyrations. And never fall in love with a stock - it won't love you back.
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