Plain Money ideas

What to do near a market top

As I write this, there’s a lot of excitement about the stock markets breaking previous highs, possibly headed toward a new all-time high. What’s a stock investor to do? Since stocks inevitably go down from all-time highs, shouldn’t you try to sell out at the top and pocket your gains?

The answer is simple: no. Selling out at the top is easier than it sounds — you never know when a top occurs until it’s gone. Selling out may leave you wishing you had left your money in, as new and higher peaks are achieved.

So what should you do as the market flirts with new highs? That’s easy: Buy and hold index funds, regularly, in small amounts. A regular investment from each paycheck is a great way to go. You’ll buy some expensive stock, to be sure, and you’ll make less money than someone who “times the market” perfectly. Such people are both rare and lucky.