The numbers are staggering. The S&P 500 has set 28 new closing highs in 2025 so far, and many investors are feeling that familiar itch. After watching their portfolios soar to record levels, a voice in their head whispers: “This can’t keep going. What goes up must come down. It’s time to get out.”
If you’ve felt this way recently, you’re experiencing what psychologists call “peak aversion” — the deeply human belief that extraordinary success must be followed by extraordinary failure. It feels prudent, even contrarian. You’ll look like a genius when the inevitable crash comes.
But here’s the problem: before you even click “sell,” you need to answer the most important question that most market timers never consider: At what point will you get back in?
The Decision That Dooms You Before You Start
If you’re thinking about selling at all-time highs without having a firm re-entry point, you’ve probably already lost. This isn’t about being smart enough to time the top — it’s about being smart enough twice: timing the exit AND the re-entry.
So let’s be honest: what’s your number? If you don’t have one, you’re not a market timer — you’re just someone fleeing to cash with no plan to return.
Are you waiting for a 5% dip? That happens multiple times most years. A 10% correction? Those occur on average every 1.2 years since 1980, and the S&P 500 has spent more than a third of the time since 1927 trading 10% or more below a recent high.
Most investors bailing out at highs aren’t thinking small. You’re probably looking for something that feels meaningful — 20%, 30%, or even the kind of dramatic declines we saw in 2008 or during the March 2020 crash.
But here’s where the psychology gets vicious: even if you’ve picked a number, the market will torture you with scenarios that make sticking to your plan nearly impossible.
Scenario One: The Market Never Crashes — All-Time Highs Are Not Sell Signals
This is the scenario that breaks market timers before they even begin: You sell expecting a crash, and the market just keeps rising to more all-time highs.
Here’s what most investors don’t understand: All-time highs are not warning signals — they’re the market’s normal state. The market is designed to grow over time, which means it’s constantly on a path toward new records.
Consider this: The Dow Jones currently sits around 46,500. Twenty years ago, in 2005, it was hovering around 10,500. That’s more than a fourfold increase, representing thousands of “all-time highs” along the way. Each of those record-setting days looked exactly like today — scary to nervous investors, but perfectly normal for a growing economy.
The data is overwhelming: Since 1950, all-time highs occur about 7% of all trading days, or roughly one new high every 14 trading days. Put another way, since 1926, 31% of all months have included at least one all-time high.
Real Example — 2012-2014: During this three-year stretch, the market gained 16%, 32%, and 13% respectively, while setting 88 all-time highs across those years. Many investors expected a correction after such strong performance and multiple record highs. The crash never came. An investor who sold in 2012, expecting the market to “come back down to earth,” would have missed those consecutive years of strong gains. The market is up almost 300% since then.
The psychological torture is brutal: If you thought the market was “too high” when you sold, how can you possibly buy back in after it’s gone up another 25%? Your brain rebels against buying something that’s now even more “expensive” than when you thought it was overvalued.
But here’s the crucial insight: Returns are actually better when you invest at all-time highs. 12-month returns following an all-time high have been better than at other times, with a 10.4% lead over inflation, compared to 8.8% when the market wasn’t at a high.
Why? Because all-time highs often signal continued strength, not imminent doom. The market hitting new records is evidence of a healthy, growing economy doing exactly what it’s supposed to do.
Scenario Two: The 10% Tease That Never Becomes 20%
Let’s say you’ve decided that 20% is your re-entry point. This seems reasonable — it’s the traditional definition of a bear market, and surely any decline that large represents a real buying opportunity.
Here’s what actually happens: The market drops 12%. You’re feeling vindicated. Then 15%. You’re getting excited — you were right! But now you face your first psychological trap: Do you get back in at 15% down, or wait for your full 20%?
Real Example — 2018: The S&P 500 set multiple all-time highs throughout 2018. From its peak in September 2018 to its December 2018 low, the market fell about 19.8% — just missing that 20% bear market threshold by 0.2%. An investor waiting for a “real” 20% decline would have watched the market bottom at 19.8% and then surge 28% in 2019. They never got their 20% entry point, and they missed the entire recovery.
This is the most common way market timing fails: The correction you’re waiting for either never comes or stops just short of your target. Since looking out just one year from each all-time high in the S&P 500, market corrections greater than 10% have occurred only 9% of the time. Most market timers spend their time waiting for events that simply don’t happen.
Scenario Three: You Actually Timed The Big One, But Were Still Wrong
But let’s say lightning strikes and you actually get it right. You manage to time one of the rare, genuine market crashes. Surely that vindicates the strategy?
Not even close. Even perfect timing creates an impossible psychological trap.
Real Example — The 2008 Financial Crisis: You sold at the peak in October 2007. The market started falling, and by March 2008, it was down about 20%. Time to buy back in? Hardly. Banks were failing, Bear Stearns had collapsed, and everyone was talking about whether this was the next Great Depression. Would you really have been buying when it seemed like the entire financial system might collapse?
Even if you had superhuman courage and bought at 20% down, you would have watched your “smart” purchase lose another 37% as the market eventually fell 57% from peak to trough. Suddenly, your 20% re-entry target seems foolish. Maybe you should have waited for 30% down. Or 40%. Or 50%.
Real Example — The 2000 Dot-Com Crash: Same story, different year. You brilliantly sold at the March 2000 peak. By early 2001, the market was down 20%. But the headlines were screaming about the “New Economy” being a fraud, tech companies with no profits, and a recession looming. Would you have been buying?
If you did buy at 20% down, you would have endured another 29% decline as the market ultimately fell 49% from peak to trough over 2.5 years.
Here’s the cruel irony: Even when market timers are completely right about a crash, they still usually get it wrong. When you’re in the middle of a financial crisis, 20% down doesn’t feel like a buying opportunity — it feels like the beginning of the end. Your brain, already trained to fear disaster (which is why you sold in the first place), will convince you to wait for an even bigger decline.
And even if you’re disciplined enough to stick to your 20% target, watching your “smart” purchase lose another 30-40% will make you question whether your re-entry point should have been much lower. This is the psychological trap that destroys even successful market timers: There’s always a reason to wait for a bigger decline.
What To Do Instead of Selling Everything at Market Highs
Here are three smarter ways to ease your mind and lower risk without abandoning growth.
1. Use a Partial Hedge
You don’t need to make an “all or nothing” call. Shifting a small slice of your portfolio (say, 10–20%) into safer assets can provide psychological comfort and real downside protection. That could mean short-term Treasuries, high-yield savings, or even a bond ETF. This lets you lock in some gains and give yourself a cash cushion, without derailing long-term compounding.
2. Reallocate Toward Undervalued Areas
Markets don’t move in sync. When the S&P 500 is setting records, other sectors or regions may be lagging.
- U.S. sectors: If large-cap growth has soared, check whether small-cap, value, or international stocks are trading at better relative prices.
- Global exposure: Developed international markets and emerging markets often move on different cycles than the U.S.
Why it works: You’re still invested, but shifting from “expensive” areas to cheaper ones can smooth returns and reduce concentration risk.
3. Check If You’re Overweight in Stocks
A run-up in equities often leaves investors unintentionally more aggressive than they planned. If your goal was a 60/40 stock-bond mix and you’re now at 75/25, it’s time to rebalance.
The Bottom Line
The next time the market hits all-time highs and that voice whispers “get out,” remember: You’re not deciding whether to sell. You’re deciding whether to start an agonizing guessing game with no good answers.
The market reaches all-time highs because that’s what markets do. They climb a wall of worry, year after year, hitting new peaks along the way. Selling at those peaks isn’t contrarian wisdom—it’s fighting a long-term upward trend that has worked for over a century.
Stay the course. Stick to your plan. And let the market timers torture themselves with their re-entry decisions while you keep building wealth.
