BROADCASTS.com

b"With\\xa0Michael Batnick, Director of Research at Ritholtz Wealth Management and writer of the blog\\xa0Theirrelevantinvestor.com
Looking Ahead to the 2017 Stock Market: Are We in a Bubble?
In my end of year interview with wealth management Director of Research Michael Batnick, we wrap up 2016 by reviewing market movements and looking at winning and losing strategies during this year as well as over longer term bull and bear market cycles.\\xa0 Wondering where the stock market is going in 2017?\\xa0\\xa0 With the bullish trend that's been building steam since this summer\\u2014and has really taken off in the past six weeks\\u2014are we entering \\u201cbubble territory\\u201d?\\xa0 If so, is it a bubble that has spread wealth throughout markets and the economy, or is it, in fact, a bubble that \\u201cshould be ashamed of itself\\u201d as Steve terms it, meaning one that so far has only had limited benefits to the upside, and perhaps ought not to be trusted.\\xa0\\xa0 Michael's thoughts on these subjects might surprise you, as even a veteran investor such as he admits that when it comes to timing the market's ups and downs, the unknown factors greatly outweigh the known.
Don't Be a \\u201c2% Investor\\u201d
One major takeaway from this conversation concerns the riskiness and overall poor performance of non-professionals attempting to \\u201cplay the market.\\u201d \\xa0Michael refers to these do-it-yourselfers as \\u201c2% investors\\u201d because their average returns over time rarely provide more than a rather anemic 2% return.\\xa0 The psychology behind the impulse to beat the steady-but-not-spectacular returns provided by managed funds (like mutual funds) is a powerful one, but those that follow it usually find the results disappointing at best.
They say hindsight is 20/20, and along those lines, markets can appear more rational or predictable than they really are when looking backward.\\xa0 The temptation to get in and out of the market, making money and protecting gains by simply following significant trends up or down, seems logical in theory, but in practice, there is a lot of guesswork involved.\\xa0 Timing even major market changes is far trickier than it might appear to the average observer.
As Michael points out, correctly identifying a true bear market is quite difficult in and of itself.\\xa0 Even when markets shed 10% or more of their value, in the majority of these cases a -30% or -40% bear market does not ensue.\\xa0 If you've pulled the trigger to sell after a 10% correction, you may be leaving a lot of potential gains on the table.\\xa0 And for folks who think that selling some or all of their stocks while they are at all-time highs\\u2014as they are now, for example\\u2014again with the hope of getting a jump on the rest of the market and cashing in capital gains, Michael reminds us that in the history of the stock markets, all-time highs have followed one after another, more or less permanently raising the value of the market over the long haul.\\xa0 Not only that, but selling stocks means losing out on dividends, and the rewards of buying new stock with those dividends.\\xa0 The 2017 stock market may or may not continue the bullish trends of the latter part of 2016, but one thing that's certain is that most short-term investors, whether selling or buying, are going to guess wrong on the timing.\\xa0 It's really just a question of how off was their timing, and how much that cost them.
Alternatives to Playing the Stock Market in 2017
Michael suggests that picking and timing stocks are, at the end of the day, a fool's errand for most individual investors.\\xa0 And while for the moment, most indicators seem to be signaling continued gains in the 2017 stock market, if you've got a disproportionate amount of your portfolio invested in stocks, you are exposed to a higher level of risk than is appropriate for most people."