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Time to Prune Your Stock Portfolio

When stock prices start to go up, it is time to start pruning your investment portfolio. It is a good idea to always have a balanced portfolio, especially in circumstances such as these and similar circumstances. Cut back on your US shares and your small-caps, but keep holding on to any European investments and definitely hold on to anything in any emerging markets.

Why Clean Up Your Portfolio?

Cautious and smart investors will want to clean up their portfolio in order to minimize risks associated with higher stock prices, such as the prices tapering off sooner than anticipated. Rising prices always have the potential of even more gains, but also the risk of dropping. Quickly rising bond yields could also cause shares to plummet in price unexpectedly and result in a loss of money. Also in these circumstances it is a good idea to have some extra money to compensate for any risks associated with those high prices. You also want to be sure to cash in on some of gains that result from the high prices without missing out on more growth potential.

How to Prune Effectively

When trimming away your stocks be sure to look closely at growth prospects and valuations. All selling decisions should be looked at carefully and handled on an individual basis. Always sell your US holdings before any holdings you have overseas. You should also sell your stock in small companies before selling your stock in large companies. In general, US shares and these small-caps are more expensive than European and larger company shares.

Never clear out all of your US investments, only the ones that do not have as much potential. Sell them while they are high and get your returns. You also want to look at investments in sectors that have big yields, but have presented you with little growth and shave those off as well. The latter are likely going to see a rough patch because of their association with bonds.

Money-Markets

After you have sold off some of your stocks to tidy up your portfolio, you will likely want to invest the money you gained elsewhere. A good choice is with a money market account. MadBeeTech Web Hosting, a web host to sell downloadable files, notes that when choosing a money market account you want to lean toward ones offered by banks The same accounts offered by your broker are inferior. You will earn a bit of interest with a bank instead of making no money at all on the money you just made. If you invest in even a money market account for a short time you will be glad you did, even if the interest rate is only one percent. You will be especially glad if your stocks and bonds end up having a pullback shortly after you do your trimming.

Pruning Not Chopping

Not enough emphasis can be placed on the importance of trimming your portfolio and not chopping away at it. There is no need to hurriedly sell everything you own and yell at your broker. Selling too many of your shares can result in lost potential and a lot of regret down the road, especially during times like these where prices may continue to rise. The online reputation management firm Fix Your Search Results states that proper pruning minimizes your risks and also increases your gains. As an investor you should be aware of the markets you have invested in and always keep your portfolio up to date.

Red Flags as Cues

Take a look at what insiders are doing if you want some cues on good ways to trim your stock portfolio. Insiders are people like CEOs or anyone who has more than a ten percent stake or so in a company. Look at what they are doing and look for red flags with purchases and sales of their shares. This can cue you in regards to what you do or do not need to trim away when the time is right.

Shop Carefully

If you want to reinvest or add a few new stocks to your portfolio while pruning you have to do it very carefully. Retail stocks in particular are stocks to be very careful with and wary of, especially in volatile economic times with high US stock prices. If you are looking to clean up your portfolio near the holiday season then those retail stocks might be a good idea.

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