If you have plans for a summer vacation, you might want to take your portfolio along (electronically) or you may prefer to forget about the stock market for an extended period and focus on not getting sunburned.
Most resorts and hotels have Internet connections available for those who travel, even on vacation, with a laptop, tablet or smartphone. All of these devices will keep you up-to-date on market activity.
Many brokers have mobile apps that bring their trading platform to those devices. Most long-term investors probably don't need that type of access, however it is a comfort to some, knowing they could act on an unexpected event that affects one of their holdings.
Traders (those who actively buy and sell on price changes or anticipated changes) are never far from the ability to trade. Mobile devices, with the proper apps, let them trade anywhere they can get online or have a cell-phone signal.
It wasn't always this way.
"Sell in May, then go away."
Back in the day, this was conventional wisdom for investors in the stock market. Back then, it was common for both investors and stock brokers to take long summer breaks.
Volume would fall and market activity slow considerably as fewer trades were made. Also, and this may be the biggest change, investors did not have the access to market news and activity from virtually anywhere.
Since investors were out of touch with the stock market and their brokers, a strategy to avoid nasty surprises was to liquidate your portfolio and put the cash in the bank until you returned from summer vacation.
Of course, technology has erased virtually all barriers to information and access to the stock market.
Still, there is some slowing of activity by individual investors. Institutional investors, however, don't take vacations and since a big chunk of volume is driven by electronic trading, it may be hard to pinpoint the absence of the individual investor.
What is a good strategy for individual investors planning long vacations (and don't want to worry about checking the market, even if they can)?
The safest strategy is to follow the old advice and liquidate your portfolio before leaving on vacation.
While this may be the safest, it is seldom the wisest. You should always buy or sell based on your research, risk tolerance and financial goals. Arbitrarily selling for no real reason that fits your financial goals is wrong.
First, make sure your portfolio is balanced with the proper mixture of stocks, bonds and cash. If you have had recent gains or losses, you may want to make some adjustments so you are back in balance.
Second, be sure you have stop-loss orders in place on all your stocks. A stop-loss order bill change to a market sell order when the price of the stock dips below a certain point.
This prevents a catastrophic loss if something unexpected happens to the stock or the stock market itself.
Set the stop-loss order below the low of a normal trading range so your position isn't sold on a normal trading dip. For example, if you expect the stock to trade in the $32 - $29 range, set the stop-loss order at $26 or $27.
If you have a stock with a profitable position, set the stop-loss order at a level to protect the profit. This is one of the main uses of the stop-loss order.
The stop-loss order is not perfect. If prices are in a free-fall, you may get a much lower price for your stock than you anticipated. However, in the vast majority of market conditions the stop-loss will do exactly what it is supposed to do: minimize a loss or protect a profit.
Whether you choose the high-tech route or prefer not to think about the stock market, put safeguards in place to prevent a bad situation from turning into a disaster.
