The sage’s words have been proved all too true in the past. Think about the tech bubble in the late 1990s when anything and everything with a dotcom in the name had investors beating down the door to get in.
Then again in 2008, investors were left high and dry when risky mortgage-backed bonds finally blew up, sending Wall Street, the City and the rest of the world into a financial tailspin.
Do I think the same thing could happen now? Probably not, but then I bet a lot of people who were invested in late 2007 thought the same thing.
Now what’s making me think about shifting my portfolio is simply the fact that so many people are talking about markets rising, and few are voicing the age old-wisdom "what comes up, must go down".
While over the long-term FE Trustnet research proves it is best to keep your money in the market, for people with a short-term horizon it may be time to think about taking profits from the best-performing areas of your portfolio and moving them tactically into cash, or into areas of the market that haven’t rallied so strongly.
There are a couple of reasons for this. Interest rates are likely to go up in the near future, so the outlook for cash isn’t quite as dull as it was a year ago.
Inflation has also fallen, so while you’re still losing money in real terms, you won't be down as much as you were and you will end up protecting your capital much more effectively if markets head south.
Looking at underperforming markets, the obvious draw is the cheap valuations. The UK and US have both gone up significantly in the last year and in all likelihood they won’t see the returns of 2013 again in 2014.
Valuations in Europe are better, but the region isn’t entirely out from under the shadow of the sovereign debt crisis; however, it could be a better short-term bet than the battered emerging markets.
Regardless of your investment outlook, it’s best to take heed when you hear the trumpeting of the bullhorn from all sides. We have been here before, and as we learned from George Soros in the latest edition of Investazine – if you can’t afford to take the loss, don’t make the bet.
For a look at the markets the experts are tipping to be the best performers in 2014, and for more stories, features and opinions, download the latest edition of FE Trustnet Investazine.
