Stocks are trading near 4-year highs and enthusiasm for buying stocks and mutual funds is returning. This is a good time to review some basic tips for buying mutual funds to be sure you are investing and adding positions to your portfolio for all the right reasons.
Whether you do it yourself or use an advisor, you'll need to check your desire for buying mutual funds, especially when markets are strong. Are you chasing performance or are you making your decision to buy mutual funds based upon your investment objective? W0uld you be making the same decision if the stock market was near record lows?
If you recall how to build a portfolio of mutual funds, you'll make purchase decisions based upon logic and an investment strategy that you've already created. In different words, stick to your original plan unless life changes, such as birth, death, marriage, divorce, career or significant financial changes have occurred.
The stock market certainly has come far in the past few years. However, if you've allocated your mutual funds according to your risk tolerance and investment objectives, you've likely participated in those nice gains. If your investment strategy calls for adding funds to your portfolio now, then you're making a sound investment decision. But if your primary reason for buying now is only because "everything is going up," you need to pause before buying.