2009 Stimulus Check

Investor Sentiment: What to Do About Personal Warning Signals.

We all know that investor psychology can move markets. But what about your own psychology?

If you manage your own investments, even if you take a passive approach, buying and holding, investing on a regular basis, and sticking to vanilla index funds of equities and bonds, or if you take an active approach, trading often, then you probably spend time thinking about your investments. If you have an investment advisor or someone helping you, then you probably still spend a lot of time thinking about your investments.

After years of watching and participating in the stock market, and managing my own portfolio, I have come to rely on my own personal barometer of market sentiment. If I find myself frequently and obsessively visiting Yahoo! Finance to view stock quotes or logging into my Quicken account to check the value of my portfolio, then the market is beginning to heat up. This frantic activity is now an early warning signal for me, kind of like the beeping sound on some SUV?s when they get too close to compact cars.

So if you find yourself in this situation, then what should you do? If you are like most of us, then these personal warning signals indicate something needs attention.

When you start hearing the beeping sound, here are some ideas for taking action:

. If you have expert advisors, then talk to them. Is the market too frothy? Should you revisit your investment tactics? At the minimum, you?ll feel better and perhaps be able to focus on more important things than checking Yahoo! 20 times a day.

. If you manage your own investments, then look at asset allocation, consider taking some profits off the table, or prepare a contingency plan if the market goes into a free fall.

. Revisit your long-term goals and compare them to where your investments are today.

In most instances, you?ll probably find that you have experienced a false alarm, but it never hurts to be vigilant about your money.