The Stock Market Is Around All-Time Highs: Is It Time to Sell?

The stock market performed exceptionally well in both 2023 and 2024 and is close to an all-time high. In fact, both the Dow Jones Industrial Average and S&P 500 benchmark indices reached fresh all-time highs on the day this article was written. Because of this, it may seem like the stock market is expensive, and that it isn't a great time to invest.

While it's true that the central goal of investing is to buy low and sell high, you'd be surprised at how little the timing of your investment matters -- especially if you're planning to keep your money in your brokerage account or IRA for a decade or more.

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Why you shouldn't worry about an all-time high

Of course, it would be ideal to buy stocks when the market is at a low point, but trying to time the market is a losing battle. Just because it is at an all-time high doesn't mean it can't go much higher.

For example, in late 2014 the market had essentially gone straight up in the five years since the financial crisis ended, and the S&P 500 was sitting at a new all-time high. Many investors were worried that the market had become too expensive and was due for a major correction. Since that time, the S&P 500 has produced a 249% total return for investors who held on. Imagine if you were one of the many people who stayed out of the market -- you would have missed out.

Even if you buy at the worst possible time, history tells us that you'll be just fine in the long run. Here are a couple of real-world examples.

The S&P 500 reached a (then) all-time high on Feb. 19, 2020. It then proceeded to plunge by 34% in just over a month as the COVID-19 pandemic changed life in the United States as we knew it. However, if you had put $10,000 into an S&P 500 index fund on Feb. 19, the worst possible moment before the COVID-19 crash, your investment would be worth about $19,000 today.

Arguably the worst time in the past two decades to have invested is Oct. 9, 2007. That was the S&P 500's all-time high before the financial crisis triggered a drop of more than 50% and led to the worst recession since the Great Depression in the 1930s. But a $10,000 investment in the index at that point would be worth nearly $54,000 today. And that's if you bought at the absolute worst possible time.

One strategy that works in all market environments

The point is that the longer you invest, the less that timing matters. Older Americans who invested at a peak before the deep recession in the 1970s likely look back and are thrilled with their decision.

Having said all that, if you're worried that we might be near a market peak, one smart strategy that could work for you is known as dollar-cost averaging. This essentially involves investing equal dollar amounts at specific intervals (for example, $500 on the first day of every month).

By using this type of strategy, you'll naturally end up buying fewer shares of your favorite stocks and ETFs when the market is high, and more shares when prices are lower. Over time, you'll end up with a mathematically favorable average cost, and it completely takes market timing out of the equation.