The Australian stock market is on a tear, with the S&P/ASX200 (INDEXASX: ^AXJO) (ASX: XJO) up nearly 20% from recent lows of 4,950 struck in February 2016.
At its current level of 5,912, the ASX200 is back within striking distance of the mythical 6,000 points. That level has been breached only once before, in 2007, when the market hit its all-time high of 6,700 points and began the precipitous tumble back to 3700 points.
With the large number of companies hitting new highs each week, surely it's only a matter of time before we break through the magic 6,000 once again? CSL Limited (ASX: CSL) trades at an all-time high of $130.11 per share.
Commonwealth Bank of Australia (ASX: CBA) shares trade at $87, below their all-time high of $96, but not by much. At $44, Wesfarmers Ltd (ASX: WES) shares are the highest they've been since 2007.
Admittedly, BHP Billiton Limited (ASX: BHP) is potentially heading down, not up, and Telstra Corporation Ltd (ASX: TLS) is not exactly a focal point for investor enthusiasm right now. So perhaps we won't see ASX6000 any time soon. Still, with this newfound enthusiasm for big stocks, investors should adhere even more steadfastly to the basic principles of investing:
- Look for quality merchandise at an attractive price
- Remember that big stocks generally move and grow more slowly than smaller ones
- Always keep some cash saved for a rainy day, or a market crash
- When the market is down 50%, aim to be a net buyer, not a seller
Now, I'm not predicting a market crash or anything like that. I have seen that a number of big companies are looking pricey, and several successful fund managers have commented that the market looks expensive. These investors are also increasing the amount of cash they hold in their portfolio, an action that speaks louder than words.
