Advisers say investors should step back and look beyond numbers

By KARIN PRICE MUELLER
STAR-LEDGER STAFF

With the Dow Jones industrials smashing through milestones, your portfolio is probably experiencing a nice bump up.

While it's exciting when indices reach round-number heights, advisers say it is important to step back and look at the bigger picture.

"Thirteen-thousand is psychological, but it's not much more than that in most people's eyes," said Ronald Garutti, a certified financial planner with Langdon Ford Financial in Parsippany.

As an investor, you are probably wondering if 13,000 is just a number, or, a signal to make some moves with your investments. Christopher Cordaro, a CFP with RegentAtlantic Capital in Chatham, said 13,000 is just digits, but they have meaning.

"Why should we get so excited?" he said. "The Dow reaching 13,000 represents about a 4 percent year-to-date increase. In the `Three Little Bears' ' language, it's not too cheap, not too expensive, it's just right."

Cordaro said at 13,000, the Dow is still a relatively good value. He said with a price-to-earnings ratio of 17.5, the Dow isn't cheap, but it isn't overly expensive, especially relative to other indexes. For example, the Russell 2000, a broad index of smaller stocks, has a pricier P/E ratio of 41.

Here are five simple strategies to think about as stock continue their rise:

1. Consider Rebalancing Your Portfolio

If you started the year with a 70 percent stock allocation, the market's upward swing may have boosted your portfolio's stock allocation to 80 percent or more. If your goals and risk tolerance haven't changed, it may be time to rebalance your portfolio. Al Gobo, a CFP with U.S. Financial Services in Fairfield, said you should think about some stocks and buying more fixed income. "In other words, sell high, and buy low — a novel concept!" Gobo said.

2. Think Long Term

If you're in the stock market, you should be in it for the long-run, said Darin Pope, a CFP with United Atlantic Advisors in Secaucus. "Remember these moments. Four-and-a-half years ago, when the Dow was at 7,286 on Oct. 9, 2002, there was a feeling the market would never get to this point, ever," Pope said. If you have trouble balancing the discipline, knowledge and emotion of stock market investing, Pope suggests you seek professional guidance.

3. Don't Ignore Bonds and Cash

If you think stocks will go higher, you may be tempted to increase your equity exposure. Jack Oujo, a CFP and CPA in Wall, thinks the market is still slightly undervalued, but he advises you look before you leap. "Investors should still maintain diversified portfolios due to the fact that we live in an uncertain world — you never know if a terrorist attack is around the corner," Oujo said. "You cannot be complacent and still need exposure to bonds and cash."

4. Don't Become Overconfident

Yes, the market has been on a roll, but don't let this lull you into a false sense of security. The market can retreat just as easily as it has run up. "Much is made about these milestones, but little to nothing should be done as long as you have established a well-allocated portfolio," said Michael Gibney, a CFP with Highland Financial Advisors in Riverdale. "Doing something in response to the achievement of a milestone would loosely equate to market timing. Put it in perspective."

5. Forget About It

If you've set up a portfolio based on your goals, risk tolerance and time horizon, a surge in stocks shouldn't change your plan. In a sense, you should forget about it. "The market is no place for investors with short-term goals and time horizons," Gobo said. "But if you have time on your side and can deal with the short-term ups and downs, the market has proven to be friendly to investors who have stayed the course — assuming you didn't buy junk in the first place."