Micromanaging your portfolio can be a tremendous hassle – not to mention unprofitable for traders who sell out of winning positions and fail to cut losses. However, micromanagement may no longer be necessary in this market climate. Investors have started to return to the market, and the cash on the sidelines is starting to be reinvested back into Wall Street. Optimism is brewing, and the markets are relishing in the positive, while paying absolutely no attention to the negative.
Making the Most of Today’s Economy
As part of any inflationary program to jump start the economy, the money supply is expanding and interest rates are low. The government hopes that low interest rates will encourage people to spend or at least redirect their wealth to better investments. The better investment right now is in equities; there's simply no point in holding money in cash or in poorly performing debt. Calculating inflation, investors will lose money at today's low interest rates, especially in fixed income investments and other “safe” investments.
Risk Pays Today
Risk is paying off today; lesser demand for riskier investments, as well as liquidation by large firms that trade in riskier endeavors, are paying off for the small time investor. Risk is cheaper, and it’s better now than ever. Even option premiums are starting to get less expensive as large firms are liquidating their risk, but individual investors increase their risk tolerance and pick up excellent deals.
Investing is Getting Cheaper
Even the sheer task of investing is less expensive in today’s market climate. For example, mutual funds, which are reducing rates to compete with exchange-traded funds, are getting less expensive by the day. Certificates of deposits no longer have expensive options to cancel the agreement, and commissions are getting less expensive as more brokers enter the market. Today, the power is in the hands of investors; they're the only ones with the capital to invest and they're getting the best deals.
Cash is No Longer King
What is king is where the cash is placed. With banks, even investment banks, being the recipient of bailout money, there is plenty of money to flood into the market. At this point, asset bubbles are sure to bloom within months. The next bubble is forming right now in some avenues of Wall Street, and the first to discover it will be able to ride the highly lucrative profit train.