The S&P 500 is up an amazing 22% year-to-date, with no signs of slowing down.
However, for cautious investors that doesn’t mean it’s time to just throw money around the stock market willy-nilly. You can be in the wrong stocks right now even though you’ve made some money in 2013 — and it’s important to keep relative performance in mind.
For instance, if you have big-name blue-chips in your portfolio that have delivered a small gain so far this year, you may be inclined to consider them “good buys.” However, a stock that is up 10% has performed less than half as well as the average stock on Wall Street.
And remember, that’s just the average, with others significantly outperforming even the 22% gains by the S&P.
It’s true that being greedy can do a lot of damage to your portfolio as you chase risky investments. But sitting on your hands and accepting a fraction of the gains that the broader market is racking up is not a good way to plan for retirement — because not only are you missing out on profits, but you risk seeing your stocks tumble even faster than the better investments that are out there when the market hits a rough patch.
Protect yourself against a downturn by getting into stronger stocks, and grab the profits you deserve by rotating out of these five underperformers and trading up.