Many stock market experts are convinced that April will be the month when 2013’s bull-market run comes to a screeching halt. After largely ignoring rising turmoil in Europe and continued economic concerns in China and other emerging markets, the double-digit percentage gains for U.S. stocks have pushed popular benchmarks to new records.
Whenever prevailing views on the stock market become uncertain, it’s important to keep your long-term perspective. By keeping the following three things in mind, you’ll be ready for whatever April throws at you.
1. 2013 doesn’t have to follow in 2012’s footsteps.
One big argument that experts have used to bolster their case is that last year, stocks also had a great first quarter, but then gave up all their gains by early June. By that logic, waiting for the inevitable downturn makes a lot more sense than investing at pricier levels, despite the hype generated by new market records.
Yet on countless occasions, trying to time the market has led only to frustration. With earnings looking much healthier than they did the last time the markets were this high, there’s no guarantee of any correction coming anytime soon. Counting on a repeat of 2012 could just leave you asking tougher questions later this year and beyond.
2. Some stocks will gain even if the market does sink.
If you invest solely in index funds, then what happens to the broad market is in fact all that matters to you. But one of the advantages of investing in individual stocks is that you can avoid downturns — or at least reduce their impact — if you pick winning companies.
As an example, go back to last spring. Even as the broader market lost 10% in just a couple of months, online travel portal Expedia Inc (NASDAQ:EXPE) and its review and research spinoff Tripadvisor Inc (NASDAQ:TRIP) both posted big gains as their strategy of dividing and conquering paid off with big earnings growth. Expedia cited a recovering travel industry for increases in hotel bookings, and Tripadvisor Inc (NASDAQ:TRIP) managed to boost its advertising revenue. Those advances paved the way for much larger returns throughout the rest of the year.