How Do You React to Market Highs?
Interestingly, when stock markets reach new highs, different investors may react in opposite ways. Some investors are elated and want to make the most of a booming market. Others are fearful that what goes up must come down.
Greed and fear are common triggers, but we’re always here to help ensure that emotional reactions to market swings don’t disrupt your investment strategy.
Tempted to invest more
Investors wishing to take advantage of a bull run should be careful. If you invest more funds only in equities, you might raise your portfolio’s risk level beyond your personal risk tolerance, which could lead to unnecessary anxiety down the road. Generally, we advocate that investors who wish to increase their investment amount to better meet their financial goals should maintain their personal asset allocation.
A related temptation is when an investor’s time horizon is shortening for a particular goal, and they’re wondering about keeping all of their equity investments. When the plan we established with you calls for reducing equity exposure in favour of fixed-income investments, you should typically stick to that plan—or risk falling short of your financial goal.
Tentative about investing
Not everyone feels optimistic about the market’s record highs. Some people are glad to see their portfolio value increase but worry about investing new money, fearing a market correction.
One reason to continue investing in a bull run is that, historically, a market high is often a signal of continued growth, not an automatic warning of a correction. For example, the S&P 500 index reached 57 record highs in 2024. Also, if you’re a long-term investor, you can take comfort in knowing that even if markets temporarily dip, they have trended upward over time.
We can help
We work with business professionals, executives, and families to grow and protect their wealth using our Wealth Plan formula. To discuss our approach and if it is the right fit for you, we invite you to schedule a no-obligation discovery consultation.