Investors should not be surprised by market highs; in fact, they should happen fairly regularly if stocks are gaining value over the long term. For some investors (especially those close to retirement), a market high can feel more like an indicator to “get out” rather than to celebrate rising prices.
If you feel anxious when the market reaches an all-time high, here are a few tips to remember:
- You should have a global portfolio that exposes you to different sectors, countries, and currencies. Not all sectors and countries will move in-step with one another.
- You should invest in small and large companies as well as value and growth companies. These stocks will behave differently over time and having broad exposure will make your portfolio more resilient.
- Take a long term approach (or even an intermediate approach!). Take a look at returns data below for a 80% stock / 20% bond global portfolio*. There hasn’t been a single 4 year period that experienced negative returns in the last 46 years. Yes, there have been times when returns were negative for 1, or 2, or even 3 years. Global investors who stayed invested for at least 4 years during that time experienced positive returns*.
Since we cannot accurately predict future prices (or the timing of market movements), we believe that your best strategy is to stay invested even as the market reaches all-time highs.
*For strategy weights, statistics, and disclosure click here. Past performance is not indicative of future results.