How Should You Invest During Stock Market Highs?

Mar 27, 2017 | Blog, Investing

You may have heard in the media that there have been a few recent stock market highs. The Dow Jones (a benchmark for a portion of the US stock market), for instance, broke into the headlines when it reached an all-time high of 21,000 points recently.

When there’s frenzy by both the media and investors alike during stock market highs, it can be dangerous if you allow this hype to interfere with your long-term goals.

That’s why I’ve come up with some helpful pointers that can help you invest during these stock market highs:

Avoid overconfidence

If you’re invested in equities, when there are stock market highs you’ll probably start feeling more confident about your investment plan. While it’s fine to temporarily bask in the glow of good returns, and you should have faith in your plan, you shouldn’t let too much confidence get to your head.

When you’re overconfident, you might attribute these recent gains to your skill as an investor, and become tempted to make concentrated bets in the stock market. Remember, however, that research shows that these types of investment decisions can eat away at your long-term success. So if you have hubris, you should keep your eyes on your long-term goals, rather than slim slices of recent returns.

Don’t let others influence your decisions

Your own confidence isn’t the only emotion that can sway your rational investment plan. New research shows that the confidence of others can be just as intrusive. Much like a cold, evidence suggests that the confidence of others is contagious, and its effects can be harmful.

When the media or others investors are expressing extreme confidence during market highs, it’s more important than ever to protect your own rationality. The truth is that what the stock market does next has nothing to with how confident others are about it.

Don’t take a pause on investing

When it comes to regularly contributing wealth into your investment portfolio, you might be tempted to take a breather during stock market highs. After all, we’ve been told to buy low, not high, right?

For your long-term goals, like retirement, taking a pause can have a bigger effect than you might realize. You’ll probably have to invest more after this break, since compound interest allows your wealth to snowball over time. Rather than playing retirement catch-up, in most cases you should continue to invest regularly during stock market highs.

Learn more about investing during stock market highs

At LexION Capital, we strictly stick to the science and math of the markets, so whether there are stock market highs or downturns, we don’t let emotions or hype interfere with our clients’ portfolios. If you’d like to learn more about how we can help you do the same, let’s start a conversation today.


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