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There’s nothing like a soaring stock market to make a summer break more enjoyable. The S&P 500 index’s near 15 percent return for the first half of the year ranks as the 13th best start since 1950, according to Comerica Wealth Management.

Before you break out the confetti, it’s notable that the entire universe of stocks did not rise equally over the past six months.

You probably have heard a lot about the generative artificial intelligence stock market boom, underscored by the rocket ship performance of chip maker Nvidia. This one company accounted for almost a third of the S&P’s first half performance. If you add four other companies — Microsoft, Apple, Amazon and Meta, the five contributed about 60% to the S&P 500 from Jan 1 – June 30.

To understand how narrow this performance is, it’s helpful to compare the S&P 500 with its sibling, the S&P 500 Equal Weight Index (EWI).

In the EWI calculation, each company of the S&P 500 index is given an equal weight, versus a weight based on the company’s market capitalization (the number of shares outstanding multiplied by the price of the stock). With an equal weight, the performance drops to about 4% for the first half of the year. Of course, had you put all of your eggs in the Nvidia basket, you would have been up by more than 150% this year!

All of these numbers are a great reminder that you do not need to feel the pressure to identify the next Nvidia. In fact, the beauty of owning a diversified portfolio of index mutual or exchange-traded funds is not sweating about whether or not you or your financial adviser is a great stock picker.

Sure, if you want to have a small “fun money” account, where you experiment with individual stocks, go for it. Just make sure that what you have allocated to that account is less than 5-10% of your total dollars invested. And if you are going to actively trade, you may want to do it within a retirement account, so you don’t generate a tax liability or fail to take a gain because you are afraid of taxes.

Whether you are a seasoned investor or just starting out, it’s helpful to remember three simple, but crucial steps necessary to keep your head on straight, regardless of the market climate.

Step 1: Remind yourself why you are investing. Most of us are saving for a long-term goal, like retirement or college, which is likely years or decades in the future.

There are going to be more ups than downs but try to temper your emotions at the extremes. The objective is to avoid bailing out when the dark days of a bear market arrive or piling in when the bull is running, and it seems like nothing can go wrong. Unless something shifts in your personal life, put your head down and stick to your plan.

Step 2: Determine whether you need cash within the next 12 months. If so, keep that amount in a high yield savings account, a money market account, or a short-term certificate of deposit.

Step 3: Understand how much you are paying. The past decade has seen a huge reduction in investment fees. You may be able to save money by replacing managed mutual funds with index funds or by ditching an investment “professional” and moving to an automatic investment platform.

If you are working with a financial planner who is managing your investments, make sure that they adhere to the fiduciary standard, meaning they are required to act in your best interest, at all times.

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(Jill Schlesinger, CFP, is a CBS News business analyst. A former options trader and CIO of an investment advisory firm, she welcomes comments and questions at askjill@jillonmoney.com. Check her website at www.jillonmoney.com)

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