Buying Strategies for the Current Bull Market

There's no easy answer. If you're following the disciplined strategy I use and explain in this column, you've recently raised some cash. That money is meant to be held in cash until another buying opportunity presents itself. In other words, you have to be patient. It's not such a bad fate, with short-term CDs and money-market funds yielding close to 5% with little or no risk.

There's also nothing wrong with selling some stocks to buy others, as long as you maintain a constant exposure to the market.

But I've also heard from many readers who have recently come into some money and, as a result, they're overweighted in cash (that's a nice problem to have). Some have written to say they've never owned stocks, and want to buy some for the first time. I've also heard from many readers eager to buy the 10 stocks I recommended in April, the "Ten Stocks for the Next Decade," but no buying opportunity has appeared.

It's been especially frustrating since those stocks have been doing even better than the market averages. Since March 12, the date the stocks were chosen, they've collectively gained 13.59%, compared with the S&P 500's rise of 8.8%. That's a strong performance, but no reason to abandon them just because you missed the earliest part of the run. Over a 10-year horizon, in which top stocks typically gain more than 1,000%, 13% is insignificant.

What worries me about people putting new money into the market now, or investing in stocks for the first time, is that they could be buying at a market peak. This is the antithesis of the Common Sense mantra to buy lower and sell higher. Of course, there's no way of knowing if the market is at a peak. Only time will tell. But for those who feel the risk of missing further gains outweighs the danger of buying when the market averages are setting new records, here's my advice:

It may be worth remembering that there was a big rally in the spring of 2006, too, with many people clamoring to buy. The averages peaked in April. Less than two months later, the Nasdaq had dropped 10% and a Common Sense buying opportunity was at hand. For those of you waiting now, I assure you that there will be another buying opportunity eventually.