Hey, investors. You probably have too much money in the stock market

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Statistics Canada data shows Canadian households currently have nearly half of their financial assets tied up in equity investments

Stock markets are positively sizzling and a bevy of indicators suggest retail investors are increasingly eager to get in on the action.

“I find the general public is pretty plugged into financial news right now,” said Kurt Rosentreter, senior financial adviser at Manulife Wealth. “The longer it goes on, the more people you see looking to pile in and increase their stock exposure.” The problem with portfolios that are heavily concentrated in stocks is that they are vulnerable to selloffs. And you don’t need any high-minded market predictions to know that one is coming.

Of course, they can – and probably will – get more expensive still. Strong corporate earnings can also extend the run indefinitely. But eventually, even the mighty U.S. stock market will revert to its mean.Rebalancing mostly involves making simple tweaks to bring one’s investments back in line with target allocations. It might mean moving money out of stocks and into bonds. Or reducing holdings in a specific sector or individual company that have become disproportionately large.

 

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