A retiree called me, nervous about the stock market crashing. He wanted to know if he should abandon the markets by selling his stocks and staying in cash.

AN ALTERNATIVE TO TIMING THE MARKET

Since you can't predict when the market will crash, you need a good defense. Historically, selling out has rarely been a winning, long-term strategy, since it's hard to know when to go back in. It's prudent, though, to diversify beyond stocks into fixed-income (bonds), cash, and other less risky assets.

Allocating more of your portfolio to safer asset classes like bonds and bank deposits may seem counter-intuitive when interest rates are low. In fact, when the stock market is going up, investors sometimes borrow money to buy more stocks. With interest rates at historic lows, investors can access cheap money and invest more in today's stock market. But this kind of leverage is usually too risky for most people.

IS THIS STOCK TOO EXPENSIVE?

When investing, ask yourself, “Am I paying too much for this stock?” Nobel Prize winner (and former guest on The Goldstein On Gelt Show

The retiree who called me fearful about the rising stock market needs to know that no one can time the market. Instead, folks should review and rebalance their portfolios based on their needs and their tolerance for risk.