Oh, goodie. It’s time for some more stock market terminology.
What Is a Melt Up?
The world of finance, like any specialized group, has numerous terms, acronyms, and phrases that apply to managing money and investing in the stock market. Things like “Santa Claus Rally” are less about being able to describe something, and more about having fun, sometimes clever, ways to describing events, strategies, and happenings that occur.
Santa Claus Rally -- The somewhat common phenomenon of the stock market rising into the end of the year.
Today’s word of the day comes courtesy of CNN Finance and Luke Lango, InvestorPlace senior investment analyst who wrote that they believe there will be a massive melt up over the next two years in which the stock market would rise 20% or more before tipping over into a recession or crash.
I haven’t had a chance to look into Luke Lango’s track record. Maybe I’ll do that when I finish writing my freelance finance writer projects.
Should We Worry About a Melt Up?
Good news, investors. As always, the best way to invest for long-term goals is with a well-diversified portfolio tailored to your goals and risk tolerance. Such a portfolio is in a good place to benefit from a melt up as you rebalance each year. For shorter-term investors, a melt up is one of those slow-motion things you won’t really see coming. As such, there is really no reason to worry about it, or watch for it. Instead, invest in companies whose long-term future you believe in that pay solid dividends. You’ll earn those tax-qualified dividends all the way up the melt up and back down the melt up. A few years after that, a recovered market will deliver your principal back to you, and maybe some capital gains along the way as well.
For short-term investing, a melt up is a longer-term event. Even if you trade right in the middle of the melt up, your trades will complete before the melt up can begin and end.
Happy Friday, investors. Enjoy the last few weeks before the Fed’s widely anticipated half-point rate hike.
Brian Nelson is a freelance financial writer and spent several years as a Certified Financial Planner while working with clients as their trusted financial advisor. — About FinanceGourmet