Every time the stock market hits an all-time high, the headlines start to sound eerily familiar: “Is this the top?” “Should investors take profits now before the crash?” “Are stocks overvalued?”

It’s natural to feel a little uneasy when markets are soaring. After all, nobody wants to be the one left holding the bag when prices start to drop.  But history and a bit of psychology tells us that selling out of the market just because it’s at a high can be one of the biggest mistakes long-term investors make.

Let’s unpack why.

All-time highs are more normal than they seem

An “all-time high” sounds rare, but in reality, it happens all the time and is usually a sign of a healthy, growing economy.

Take the S&P 500, for example. Since 1950, the index has hit over 1,300 all-time highs. That’s about once every three weeks, on average. If you had pulled out after any one of those highs, you would’ve missed out on decades of compounded growth that followed.

Markets make new highs because companies grow earnings, economies expand, and innovation creates new opportunities. Sure, there are dips and bear markets along the way, but over the long run, the direction of the market has historically been up.

It’s best to think of the new highs as milestones instead of warnings.

Timing the market almost never works

We’ve all heard the saying: “Time in the market beats timing the market.” It’s cliché because it’s true.

It’s nearly impossible to get market timing consistently right. That’s because short-term market movements are influenced by emotions, news cycles, interest rates, and global events that nobody can predict with accuracy.

When you sell because you think the market is “too high,” you’re making two tough calls:

  • When to sell
  • When to buy back in

The first mistake is often followed by the second.  Many investors sell when things “feel” expensive, then wait for a pullback that never comes.  Meanwhile, their cash sits on the sidelines while the market keeps climbing.

A recent study from J.P. Morgan showed that if you missed just the 10 best trading days in the market over a 20-year period, your returns were cut in half. Missing the 20 best days? Your returns dropped by about 70%.

Making things even trickier — the best days often come right after the worst ones. So, if you panic and sell during volatility, you might miss the rebound that follows.

Valuations don’t always tell the full story

It’s easy to look at price-to-earnings ratios or charts and conclude that the market “must” be overvalued. But valuations are relative; they depend on interest rates, inflation expectations, and growth potential.

For example, in the late 1990s the market looked expensive by traditional metrics, and yes, the dot-com bubble eventually burst. However, many investors who stayed diversified and held their ground still came out far ahead over the next two decades.

Even if the market cools off in the short run, long-term investors who keep buying through the ups and downs benefit from dollar-cost averaging, buying more shares when prices are low and fewer when prices are high, smoothing out their cost over time.

Pulling out can cost you more than you think

Selling out of the market isn’t just about missing potential gains, it can also cost you in real, tangible ways.

  • Taxes: If you sell stocks in a taxable account, you’ll likely owe capital gains taxes. That means Uncle Sam takes a cut before you even get a chance to reinvest.
  • Inflation: Sitting in cash can feel “safe,” but inflation quietly erodes your purchasing power over time. Even at 3% annual inflation, $100,000 today will only buy you about $74,000 worth of goods a decade from now.
  • Opportunity cost: The stock market’s long-term average return is hard to beat. Every year you sit out, you’re giving up potential compounding — and compounding is what makes investing powerful in the first place.

Focus on your plan, not the headlines

Markets go up, markets go down, but your financial goals should guide your actions, not the daily news.

If you’re investing for retirement that’s still 10, 20, or 30 years away, what the market does this week or next month doesn’t really matter. What matters is staying consistent.

That doesn’t mean you should ignore risk. It means you should manage it thoughtfully — through diversification, regular rebalancing, and a realistic understanding of your time horizon.

If market highs are making you nervous, it might be a sign to review your asset allocation, not abandon your strategy. Maybe it’s time to rebalance from stocks to bonds, or to increase your emergency fund, not to hit the panic button and sell everything.

The long-term trend is your friend

When you zoom out far enough, the stock market looks less like a roller coaster and more like a steady upward slope.

Yes, there have been gut-wrenching crashes; 1987, 2000, 2008, and 2020 come to mind. But in every single case, the market eventually recovered and went on to hit new highs.

Imagine if you’d sold during one of those crashes, convinced the market would never recover. You’d have missed some of the strongest rallies in history.

The reality is that all-time highs are only visible in hindsight. Ten years from now, today’s “expensive” prices might look like bargains.

Bottom Line

Selling just because the market is at an all-time high is like leaving a party early because you’re worried the music might stop. Sure, the beat might slow down for a bit but if you leave every time it does, you’ll miss most of the fun.

Long-term investing isn’t about predicting the next move, it’s about staying disciplined through every phase of the cycle. The investors who succeed aren’t just the ones who get the timing right; they’re the ones who stay the course.

So, the next time the market hits another record high (and history shows it will), take a deep breath, tune out the noise, and remember all-time highs are a feature of the market, not a flaw.

Keep investing, keep compounding, and let time and Greystone do the heavy lifting.

Eric Moss
Director

Disclosures:

This is provided for informational purposes only and should not be interpreted in any way as investment, tax, accounting, legal or regulatory advice. An investor must take into consideration his/her individual circumstances. 

There is no guarantee investment strategies will be successful. Investing involves risks including possible loss of principal. There is always the risk that an investor may lose money. A long-term investment approach cannot guarantee a profit.  All expressions of opinion are subject to change. This article is distributed for educational purposes, and it is not to be construed as an offer, solicitation, recommendation, or endorsement of any particular security, products, or services. Investors should talk to their wealth advisor prior to making any investment decision.