Don’t Sell When Stocks Are High

Dan Westfall

Dan Westfall

Dont Sell When Stocks Are High

Market movements are the results of investors voting with real money. There have been many all-time highs in the stock market since I started my financial career in 2011. And one thing is clear – don’t sell when stocks are high.

Stocks at an All-Time High – Don’t Sell

When stocks are at or near an all-time high, there will always be the Ned and Nancy naysayers explaining how stocks are overvalued and going down. Many people say the big drop is coming soon. Or, my personal favorite, some say the president is incompetent and, therefore, stocks will drop.

That last scenario, where the current president is said to change the market, is probably the most common. However, history has proven otherwise. It didn’t matter whether Obama, Trump or now Biden is president. The false alarms all sound the same. They just came from different people.

This is a stock market history lesson that Ned and Nancy never learned. Stock market highs have, over time, always been followed by (drumroll)… new stock market highs.

S&P 500 Index 1928-2021

S&P 500 Index 1928-2021

So often investors fear the “inevitable drop” that really is just misguided fear. This dives into the psychology that makes investing so hard. Even though most investors understand that the longer you are invested, the more money you make through the power of compound interest. Studies have proven that losing money on an investment is far more painful than the satisfaction from making money on an investment.

Investing During Stock Market Highs

All-time highs in the market or a single stock show that real people are voting yes with their money. That’s not a negative sign. It is overall positive. Sometimes an all-time high can be a negative sign. On top of that, it can be followed by a drop in prices, specifically when that stock or index has gone up too quick.

A perfect example would be GameStop in January 2021. GameStop stocks spiked because of traders on Reddit organizing to get behind the stock, which drove it to ridiculous levels.

GameStop Stock in January 2021

GameStop and Reddit Stock Surge

Taking a long-term view towards investing isn’t fun or exciting in the short-term. However, sticking to a long-term strategy will be the best way to grow money. There will always be stories about the person that invested their life savings in a cryptocurrency like Bitcoin or Ethereum in the early days and is now a multi-millionaire.

Strategic Crypto Investing

Those stories generally go like this: The investor had a little bit of money when they first invested. And now, they have millions! What they don’t say about those early investors in crypto, such as Bitcoin or Ethereum, that became millionaires. They likely went through a lot of pain and stress to get there.

For example, a Bitcoin investor in January 2016 had to hold it from a high of $400, which was a high only a year before it was around $210 in January of 2015, to a high $19k in December 2017. Then continue holding back down to $3k a year later in December 2018 and back up to about $60k in 2021. Those investors that stayed from peak to peak got paid.

Bitcoin Value From January 2015 – 2021

Bitcoin Value

Contact me today to discuss investing in stocks and make sure you are managing your money the right way.

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