NEW YORK ( TheStreet) -- Is the Stock Market Passing You By? Don't be fooled. Slow down. There are significant risks in rapidly rising equity markets and I don't want you to be a casualty. Recent short sale squeezes and the central bank induced euphoria are only contributing to the problem facing disciplined, conservative investors.
Right now, I liken the situation to your typical, congested interstate. As the stock market races to new highs, many investors begin to feel the need for speed and switch from slow moving conservative investments to the faster moving equity investments. Driving in the right lane at the speed limit can be a frustrating experience as you watch faster traffic zip by at high speeds.
Equity rallies, particularly mature ones, have the same dangerous, emotional pull on individuals as they tend to change lanes near the end of the highway to capture the time lost by playing it safe along the way.
For instance, buyers of Apple (AAPL) in the last year, who perhaps felt they were plodding along with dividends and interest from bonds, are now full of regret as that company's stock price resembles a pile-up in the left lane.It can be hard to remain disciplined, especially when there seems to be evidence to the contrary. Take the recent meteoric rise of Herbalife (HLF), from $26 to $46. The jump in price gives the impression something positive is occurring at the company when in reality it's just a short sale squeeze.
These occur when many investors have sold a stock short, betting it will go down. If the stock in fact rises, these investors are forced to cover their bets by buying the stock, driving it further upward. In fact, the recent fall and rise in HLF is just a fight between hedge fund titans. Investors who saw the momentum and got in, were betting on an illusion.
Select the service that is right for you!COMPARE ALL SERVICES
Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.
- $2.5+ million portfolio
- Large-cap and dividend focus
- Intraday trade alerts from Cramer
- Weekly roundups
Access the tool that DOMINATES the Russell 2000 and the S&P 500.
- Buy, hold, or sell recommendations for over 4,300 stocks
- Unlimited research reports on your favorite stocks
- A custom stock screener
- Upgrade/downgrade alerts
Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.
- Diversified model portfolio of dividend stocks
- Alerts when market news affect the portfolio
- Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.
- Real Money + Doug Kass Plus 15 more Wall Street Pros
- Intraday commentary & news
- Ultra-actionable trading ideas
Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.
- 100+ monthly options trading ideas
- Actionable options commentary & news
- Real-time trading community
- Options TV