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With golf season upon us here in the Northern US, it's time to find our clubs, dust them off, and try to make some time to hit up the driving range and "knock the dust off" your game. Like many sports, golf is a lot like riding a bike. Once you've hit the ball enough, you'll get right back to being as bad as you were last year in no time at all.

Once you're back to your typical horrible score, an analyst could follow you around like a caddy and after a full 18 holes, they could determine whether you're a conservative or aggressive player. Conservative golfers have a tendency to hit the ball off the tee with their best club, even if it's not their driver. They also will "lay up" when faced with a tough shot that puts a hazard between them and the green. If it's raining (or there's rain in the forecast), these golfers will find shelter if they make it out to the course at all.

Aggressive players are a different story. They drive off the tee on every hole (except the Par 3's, of course). If faced with a dog leg left (a curve in the course to the left) that puts trees, water, and sand between them and the hole, they get out their biggest club and "go for it." These are the kind of golfers that, when it's raining, thundering, and lightning, they're still on the course, hacking away at the ball (because in their minds, they might need this kind of experience of environmental factors when they play in the AARP "Tour de Idiot" someday).

Investing can be a lot like golf. Most of what you can read online or in newsletters will suggest you fill out some questionnaire to determine your risk tolerance, which will ultimately serve as the basis for an investment policy statement for your portfolio. The problem is, most brokerage firms, RIA's, and other financial professionals recommend you build your portfolio around this basis and stick with it through good and bad times.

I am from the camp that believes one should change their investment policies (or "Game Plan") whenever the environment changes. So, whether it's the course you're playing on, the particular hole in question, or the weather - in all these cases, different situations call for different strategies and decisions. If you're on the last hole of the course, one stroke away from your personal best score, and you pull out the big dawg, you might end up drowning your ball, taking the penalty stroke, and then drowning your sorrows at the bar in the clubhouse.

With golf, you can always play another day. With your portfolio, well, that's a different story.

The market has spent the last several months digging, scraping, crawling northward; and like a seasoned Tough Mudder veteran, nothing seems to be coming between the athlete and the finish line. But when it comes to the market, when you take a second to think about it, there really is no "finish line," and the markets need to "breathe" in order to advance in a healthy manner. Picture a super marathon runner trying to pull off 200 miles without a rest. If you're a conservative gambler and you want "guarantees," I'd put my money on that marathoner DNF'ing (did not finish) in that particular race.

Looking at the market today as represented by the S&P500, it's struggled this past several weeks to get north of 1592. We hit it once, creating an all-time high, and then pulled back. The next advance peaked out just north of 1574 and pulled back again, creating a lower high. Just last week, we saw the market pass up the most recent, lower high, but it then pulled back again at the end of the week, short of the 1592 high set in early April. Today, we've hit an intra-day high above that 1592 peak, but we'll see if we can close north of here today (or this week, for that matter).

Going back to our golf analogy, this is a time when you have to make crucial decisions about your game plan when it comes to your portfolio. The market has looked really good for a really long time (relatively speaking). It's still possible (today even) that we'd see another "new high close" above 1592 before we see a market correction start to really take hold, but it's my opinion that we will see a correction at some point, relatively soon. Adding insult to injury, we're moving into the seasonally weak months (starting this week) and there is no shortage of questionable economic data that could fuel such a correction.

Keep in mind, a correction would be good! Again, the market needs to breathe in order to advance healthily. It can't just inhale indefinitely. It needs to exhale from time to time so it can take in more air tomorrow.

As of last week, where appropriate, I've taken a pretty defensive posture in our portfolios and plan on staying in this position until the overall domestic and/or international markets complete the current exhale that I believe has already begun.

For those of you who plan on "staying the course," try not to get too comfortable. News was so bad for so long, it became trendy for the media to use good news to bump their ratings. Normally (roughly 2/3 of the time), news is positive, so it takes the media front-paging the bad news in order to get you to pay attention. Of course, if you work with a financial professional, chances are extremely high that they're telling you that Dow 16,000 is right around the corner… and even if there's a correction (or worse yet, a crash), "You haven't lost anything unless you sell it." Well, I'm here to tell you that,
"You haven't made anything unless you sell it," either.

Hopefully all we see is a mild and necessary correction, but even if the market starts to really dive it would be advisable to hold off for awhile until it finds a trough before going "all in." Don't let these new record highs trick you into getting into the market now, especially if you've been sitting on the sidelines in fear. Probably best to head for shelter - or at least lay up on your next shot rather than "going for it."

Source: Time To 'Lay Up'