Fighting the urge to be a momentum investor becomes increasingly difficult as the momentum swings in any one direction.
When ALL the experts on the news says real estate is a sure thing to appreciate at 10% annually, beware.
When ALL the experts say the dot.com craze justifies sky-high P/E ratios, beware.
...And when ALL the experts say the sky is falling all across the financial sector, beware.
Those first two, of course, are obvious in hindsight, but the third should be obvious in present-sight (or at least whatever you would call what's not hindsight or foresight).
I actually heard someone say today, "I'm going to dump all my money out of financials and my S & P Index Funds and stick it all in precious metals, which have appreciated nicely over the last five years."
That's a terrible idea.
Unless you've got some plutonium, a flux capacitor, a wacky scientist and a built-in Huey Lewis and the News soundtrack, that advice just doesn't apply to you.
Now is the time to grab the bargains that are everywhere in the financial and real estate sectors. If you've done phenomenally well in energy and defense, and don't think you can sustain it, now might be a good time to start hedging your position a bit by chipping away at it and walking away with some gains.
But for Pete's sake, don't just walk off the cliff behind every Lemming who would just bail out of all their stocks that are down 30%+ in this bizarre year.
Legendary early 20th-century outfielder Wee Willie Keeler hit over .400 once, hit over .300 16 times, and finished with a career average of .341.
When asked what made him such a good hitter, his famously laconic reply was just this: "I hit 'em where they ain't."
If you want to hit 'em where they ain't, go find some large-cap financials that have taken heavies all year long and are sitting down in the sewer somewhere.
Reinvest your dividends and sit back as your share values climb out of the gutter and back up on to the sidewalk.
But please don't be a momentum investor.