5 Signs You’re Missing Out on Money As the Stock Market Reaches New Highs

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• The U.S. economy is looking strong, with declining interest rates and optimistic investor sentiment.
• You may be missing out on money-earning opportunities despite the stock market bull run.
• Financial advisors suggest diversifying assets, investing cash, and maximizing your employer’s 401(k) match.

The U.S. economy continues to exhibit signs of strength as interest rates decline and investor sentiment remains predominantly optimistic heading into 2025.

The S&P 500 has been in a bull market for over two years and is up nearly 30% in 2024.

However, while the market is running with the bulls, that doesn’t necessarily mean you are. Here are five signs you’re missing out on money during the current stock market bull run, according to financial advisors.

1. You’re hoarding cash

Holding onto large sums of cash while the market is experiencing rapid growth is a major sign you’re missing out on money-earning opportunities, like capital gains and compound interest.

Cash held in traditional savings accounts or simply kept at home is steadily losing its purchasing power because of inflation.

“Your savings account balance may stay the same, but its purchasing power is getting eaten away by inflation,” Corbin Blackwell, senior financial planner at Betterment, told Business Insider.

Interest rates on bank accounts aren’t much help, either. “You’re probably only making a percentage point or so above inflation by holding cash,” Tom Graff, chief investment officer at Facet, said.

Gradd explains that while an emergency fund of cash is crucial, long-term savings should be invested in the market to protect against inflation and ensure that your money retains its value over time.

This is especially important for those saving toward retirement, as many U.S. investors fear they will eventually outlive their savings due to inflationary pressures and the increased cost of living.

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2. A majority of your stocks are in the same industry

Having a significant portion of your investment portfolio in similar company shares may limit your money-earning opportunities and increase risk. Neglecting proper diversification leads to greater volatility, as the performance of your portfolio becomes heavily reliant on only a particular area of the market.

“Just having as many stocks as you could possibly pick is not proper diversification,” Blackwell said. “When you add a stock or bond to your portfolio, you’re either keeping the risk the same for potentially better returns, or you’re decreasing risk while maintaining the same potential for return.”

Blackwell says that investors don’t need a lot of money to have a properly diversified portfolio since ETFs and fractionals offer easy and low-cost diversification.

A well-diversified portfolio, strategically allocated across stocks, bonds, and other securities based on your risk tolerance and time horizon, can help you capitalize on market opportunities while mitigating the impact of potential losses.

By spreading your investments across different asset classes, you can benefit from areas of the market that are performing well, even when other areas experience downturns.

“Spreading risk around not only helps with volatility, but more importantly, it helps make sure you’re going to get the kind of return you want to get,” Graff said.

3. You’re risk-averse

Younger investors can generally afford to take on more investment risk due to their longer time horizon. As investors age and their time horizon shortens, their portfolios typically shift toward lower-risk investments like bonds and Treasury notes.

Adopting a conservative investment strategy too early can be a sign you’ve limited your potential for long-term growth and cause you to miss out on higher-yielding market opportunities like stocks, REITs, and index funds.

“Stocks are your best bet to make a meaningful return on your money, Graff told BI. “Stocks have generally returned something like 7-10% for a 5- to 10-year period, and that is sometimes marked with some significant down years.”

Bonds are generally considered less risky than stocks, but they also offer lower potential returns. Historical returns on bonds have typically ranged from 1.5% to 5% over 5- to 10-year periods.

4. You’re trying to time the market

Attempting to time the market is not only time-consuming, but it’s also a significant barrier to long-term financial growth. Whether you’re waiting for the “perfect” entry point or chasing short-term gains, both strategies can hinder your portfolio’s ability to accumulate wealth over time.

“Getting in the market now, even if you think the mark is too high, is a good idea as you’re ready to invest in the long-term,” said Blackwell. “If speculations and predictions were consistently correct, there’d only be one way to invest, and we’d all do it the exact same way.”

5. You haven’t maxed out your employer match

If you haven’t maxed out the employer match on your 401(k), you’re definitely missing out, as this is essentially free money.

Retirement accounts like 401(k)s and IRAs are powerful savings vehicles, offering significant tax advantages and the power of compound growth. Contributing consistently to these accounts is crucial for long-term security.

However, it’s important to strike a balance. Contributions to your 401(k) or similar plan should be made without compromising your day-to-day budget or your ability to pay down debt.

“If you don’t have any help in the form of investment gains and compound interest, you’re going to have a really hard time affording retirement,” Blackwell said, emphasizing the importance of regularly contributing funds.

She added that investors shouldn’t rely on Social Security to access a comfortable retirement. “If you retire when you’re 62, you could live to 100, so you need a way to fund it.”