Client Question: Investing at the Top

January 23, 2025

I’ve met with a few clients this week and in every conversation, the subject of markets being at all time highs has come up. And with that, an underlying hesitation has been expressed about putting new money to work at these levels (specifically into US equities). Wouldn’t it be better to wait until markets are cheaper?

Investing is just as much psychological as it is logical so here are the few things I like to keep in mind when facing the task of investing cash

Holding is Akin to Buying at Today’s Levels

It’s important to remind yourself that on any given day when you’re holding your investment portfolio (ie: not selling or liquidating your positions), you are in effect buying at today’s levels. So if you’re questioning the logic of buying new positions at today’s levels, don’t forget that you already have some level of implicit comfort with today’s levels as evidenced by your current portfolio remaining invested.

Zoom Out

If you’ve been reading my articles for a while, you know one of my favorite pieces of advice is to “zoom out.” Looking at your portfolio or markets on a daily basis (or even an annual basis) can drive an investor mad. Market moving events can happen every day (if not every hour) and that leads to a bumpy and unsettling ride at times. Remember 2007? How about 2020? The good news is that most of us are on this journey for decades. And if you zoom out and look at how US equity markets have done over 40 years, a definitive trend line should be evident. This is not to say that entry points don’t matter. Of course they do. But it is to say that staying in the market over your entire journey appears to matter far more. Don’t believe me – see below chart of the S&P 500 index over 40 years. Regardless of when you put cash to work during that time frame, you have a positive return.

Dollar Cost Average

We all have different personalities. Some of us like to jump right in the deep end when swimming, others slowly go down the steps in the shallow end. You can approach investing the same way as you do a swimming pool! If you don’t want to put all cash to work at once, don’t. You may be proven right in the short run (ie: markets fall and you can buy in at lower prices) or you may be wrong (ie: markets keep rising in near term). But either way, you will be putting cash to work towards your long term goals and if history rhymes (see above), you’ll hopefully experience a upward sloping chart over time. Set a plan (ie: I will invest $x per month for x months), reconcile it in your mind, execute against that plan, and move on! This is why employer plans are such a powerful investment tool for many investors. Money goes into these plans each pay period (many times without you even thinking about it as it’s done automatically from your paycheck). Don’t be afraid to dollar cost average if that suits your style. It works for a reason – it takes the emotion out of the equation.

As with all investing topics, you need to find the approach and style that best suits your needs and specific situation. Work with your advisor and your established plan before putting new cash to work in the market. And most importantly, enjoy the journey!

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