Dow Jones Industrial Average (DJIA) index have crossed the 21,000 mark for the first time, closing at 21115.55 today. While S&P 500 closing at 2395.96, fail to cross the 2400 mark, this is a fresh all time closing high.
So what can we learn from this. DJIA at trailing 12 months P/E of about 21 is not exactly cheap, yet the index still keep going up with little sign of slowing down. In the current environment, whether to load up and buy in depends on risk profile and appetite.
From a risk management perspective, I would exercise caution on entering large positions, and enter in tranches. This will allow me to enjoy the ride up if the market continues to trend upwards. If a market correction occurs, it will be an opportunity for me to accumulate more positions. With a plan in mind, I can sleep soundly every night despite the fluctuations in my investments portfolio.
Also, this brings back to the point of being in the market. I do not have a crystal ball, but generally, if I believe in the general growth of certain markets, it is ok to take a small position, and built upon it, while letting my wealth accumulate.
It all begins with a PLAN. “Fail to plan, or plan to fail”. It still boils down to PLANNING.